North Carolina Department
of State Treasurer
THE STATE TREASURER’S
ANNUAL REPORT
TO THE PEOPLE OF NORTH CAROLINA
STATE TREASURER
JANET COWELL
FISCAL YEAR
2015-2016
It has been my honor to serve as
Treasurer of this great state for the past
eight years. The awesome responsibility
entrusted to this office was never more
apparent than in the preparation of
our Annual Report. The information
contained in the pages that follow
has served as a periodic reminder of
all the ways in which the work of this
Department positively impacts lives.
With that said, it is my great pleasure
to present the Department of State
Treasurer’s 2015-2016 Annual Report.
This report provides an overview of the
work achieved together as a Department
and also as the individual divisions
that comprise it. Those divisions are
Retirement Systems, State Health Plan,
Unclaimed Property, State and Local
Government Finance, Investment
Management and Financial Operations.
Management of the pension is a role
most closely associated with the office
of Treasurer. I am proud of the work
we’ve done over the last eight years on
behalf of public servants to secure their
retirement. We first had to stabilize the
pension fund, which had lost more than
20 percent of its value in the months
before I took office at the height of the
recession. Then, we worked our way
back and made strategic investments to
optimize the fund for the future. As the
office transitions to the next Treasurer,
North Carolina has one of the four best-funded
public pensions in the nation—
one that is well-situated for the long-term
benefit of public employees.
By approving the ConnectNC Bonds
in March, voters signaled a renewed
commitment to investing in the state’s
public universities and community
colleges, water and sewer projects,
state parks, public safety, agriculture
projects and the National Guard. North
Carolina’s ‘AAA’ bond rating is the
fiscal seal of approval that confirms the
sound financing of such an investment.
Our state continues to be one of only
nine states that maintain an ‘AAA’ bond
rating from all three agencies. We
continue to be a tireless advocate of
conservative debt management during
this time of growth.
The State Health Plan provides health
care coverage to more than 700,000
people in our state and has emphasized
wellness and engagement. A new
initiative continuing that work is a
partnership with N.C. State University
and the N.C. Division of Public Health.
This new program is Diabetes Free
NC, a 12 month process, guiding
participants to learn real-life solutions
to prevent diabetes either online or
onsite through a local provider.
These are only a few highlights from the
last fiscal year of how the Department is
committed to a common vision: create
and maintain a healthy, prosperous and
financially sound North Carolina. Finally,
I am eternally grateful to the people of
North Carolina for entrusting me to serve
in this office for the past eight years. It is
humbling to be charged with ensuring
that someone receives their hard earned
retirement check each month or that
they are receiving affordable and quality
health coverage. While the report that
follows is focused on the past fiscal year,
all of these accomplishments signify a
thriving Department. I am proud of the
work our team has to done to innovate
and modernize the functions of each
division. Thank you for the opportunity
to serve.
Sincerely,
Janet Cowell
North Carolina Treasurer
DEAR FELLOW NORTH CAROLINIANS,
TA B L E O F CONTENTS
Treasurer’s Letter. 2
Table of Contents. 3
DEPARTMENT OVERVIEW
Vision, Mission and Values. 8
Strategic Goals . 9
Providing Public Leadership in Finance, Fiscal and Health Policy. 9
Protecting the Pension Plans . 9
Maintaining the State’s AAA Bond Rating. 9
Promoting Financial Education. 10
Local Government Finance Training . 10
Conference on Sustainability in Local Government. 10
Enhancing Accountability of Department Services. 11
Published Corporate Governance Report. 11
Worksite Wellness. 11
*Spotlight: Improving Claims Experience in Unclaimed Property. 11
Assisting Local Governments with Finances. 12
Innovating and Modernizing Operations. 12
Improvements to the State Health Plan Online Experience. 12
Encouraging Engagement in Health Care. 12
*Spotlight: Supplemental Plan Awards. 13
R E T I R E M E N T SYS T E M S D I V I S I O N
Overview of the Retirement Systems Division. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Legislative Highlights. 17
Defined Benefit Plan Awards. 17
8
14
I N V E S T M E N T MANAGEMENT D I V I S I O N
Overview of Investment Management Division. 19
Short-Term Investment Fund. 20
STIF Asset Allocation as of June 30, 2016. 20
STIF Fiscal Year Performance. 21
STIF Top Ten Positions as of June 30, 2016. 21
STIF Summary of Brokers Utilized During Fiscal Year 2015-16 . 22
Pension Fund Investment Program Review. 22
Operating Policy . 23
Pension Fund Strategy. 24
National Average Gross of Fees Returns and Exposure to Risk . 24
Total Pension Fund Structure . 25
Pension Fund Asset Allocation as of June 30, 2016 . 26
Total Fund Performance. 27
Annualized Performance as of June 30, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Cost. 29
2015 NCRS Cost of Investment Operations Compared to Peers. 29
Total NCRS External Feed Paid FY 2015-2016. 29
Total NCRS Fund of Fund Fees Paid FY 2015-2016. 30
Fixed Income. 31
Core Fixed Income Structure. 31
Core Fixed Income Performance . 32
Non-Core Fixed Income Structure. 33
Non-Core Fixed Income Performance. 33
Public Equity . 34
Public Equity Performance. 35
Real Estate. 36
Real Estate Performance . 39
Private Equity. 40
Private Equity Performance. 41
Opportunistic Fixed Income Portfolio . 42
Opportunistic Fixed Income Portfolio Performance . 42
18
Inflation Sensitive Portfolio . 44
Inflation Sensitive Protection Performance. 44
Multi-Strategy Portfolio. 46
Multi-Strategy Performance. 46
Ancillary Governmental Participant Investment Program Review. 47
Escheat Fund. 47
Public Hospitals. 48
Other Post-Employment Benefits Fun. 48
Bond Proceeds Fund. 48
Conservation Easement Endowment Fund. 48
Other Ancillary Governmental Participants . 48
S TAT E & LOCAL GOVERNMENT
F I N A N C E D I V I S I O N
State & Local Government Finance Division Statistics. 50
State & Local Government Finance Division Overview. 51
History. 51
The Local Government Commission. 51
The North Carolina Capital Facilities Finance Agency. 51
The North Carolina Infrastructure Finance Corporation . 52
Debt Management. 52
Fiscal Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Outreach & Communication. 54
Other Highlights. 55
S TAT E H E A LT H P L A N D I V I S I O N
Overview of State Health Plan Division . 64
Governance. 64
Membership Statistics. 64
Legislation Enacted . 67
State Health Plan Appropriations. 67
State Health Plan Administrative Changes & Local Government Participation. 67
Longleaf Charter School Enrolled in the State Health Plan. 67
49
63
Financial Statistics. 68
Population Health Management: Member Health Statistics & Initiatives. 70
State Health Plan Health Assessment Completions. 71
U N C L A I M E D P ROPERT Y D I V I S I O N
Unclaimed Property Division Overview. 73
Unclaimed Property Division Statistics. 74
F I N A N C I A L O P E R AT I O N S D I V I S I O N
Financial Operations Division Statistics . 76
Financial Operations Division Overview. 76
History. 76
Banking Operations. 76
Bank Reconciliation Unit. 77
Statewide Accounting Operations. 77
Departmental Accounting. 77
Procurement & Contracting. 77
Bank Balances. 78
72
75
DEPARTMENT OVERVIEW
7 North Carolina State Treasurer’s Annual Report • 2015-2016
The Department of State Treasurer serves the people of North Carolina through a variety of functions related to the
financial health of the state and its citizenry. State Treasurer Janet Cowell serves as the state’s banker and chief
investment officer, and, as such, she is responsible for more than $100 billion in assets.
The Department administers the public employee retirement systems for more than 900,000 North Carolinians, as well as
the 401(k), 457 and 403(b) plans for public employees. The Department provides fiscal assistance and expertise to local
governmental units by assisting them in the sale of local government debt obligations and in maintaining good budgeting,
accounting, reporting, and other fiscal procedures. The Department oversees the State Health Plan, which provides
health care coverage to approximately 685,000 teachers, state employees, retirees, current and former lawmakers, state
university and community college personnel, and their dependents. It also administers NC Cash, the unclaimed property
database that holds approximately $440 million.
The Department of State Treasurer is made up of approximately 400 employees, and is composed of the following
divisions:
DEPARTMENT OVERVIEW
VISION, MISSION AND VALUES
The vision of the Department of State Treasurer is to create and maintain a fiscally sound and prosperous North Carolina.
The Department works to achieve this goal by taking utmost care in overseeing the finances of the State.
The Department’s mission is to add value to and instill confidence in the state's citizens, customers and the financial
community by providing exemplary oversight and customer service.
At the heart of the Department's work are its core values, which are implemented consistently at all levels and across all
Divisions. These include:
Retirement Systems
State Health Plan
Unclaimed Property and Escheats
State and Local Government Finance
Financial Operations
Investment Management
Information Technology
Office of State Treasurer
Customer Orientation
Focus on our customers, the citizens
of the state of North Carolina
Diversity
Recognize and value the benefits of
diverse ideas, perspectives,
and people
Integrity
Establish and maintain the highest
level of integrity and ethics
Long-Term View
Maintain a big-picture perspective
and strategic approach
Performance-Driven
Operate with performance excellence
to achieve optimum results
Transparency
Structure and conduct all aspects
of our work with an open and
transparent policy, promoting both
trust and accountability
North Carolina State Treasurer’s Annual Report • 2015-2016 | 8
DEPARTMENT OVERVIEW
STRATEGIC GOALS
The Strategic Plan provides the vision, mission, strategic goals, and performance measures for ensuring the desired results
for the Department of State Treasurer. The plan is a result of the assessment, goal setting, and planning process of the
Department, designed to influence future success and achieve departmental goals.
The Department has identified the following strategic goals for the 2015-2016 Strategic plan:
This report will address Department highlights of the first three goals. The fourth goal, maximizing talent, was added to
focus on staff recruiting, retention and growth, which will support the other strategic goals. This report will focus on the
external-facing divisions of the Department and their work on behalf of the people of North Carolina: Retirement Systems,
State Health Plan, Unclaimed Property and Escheats, State and Local Government Finance, and Financial Operations.
Goal 1
Providing Public Leadership
in Finance, Fiscal and
Health Policy
Goal 2
Enhancing Accountability of
Department Services
Goal 3
Innovating and Modernizing
Operations
Goal 4
Maximizing Talent
PROVIDING PUBLIC LEADERSHIP IN
FINANCE, FISCAL AND HEALTH POLICY
The Department of State Treasurer serves as a model
for others so as to positively influence legislative,
finance, health care and other government agencies in
promoting finance, fiscal and health policies that create and
maintain a financially sound and prosperous North Carolina.
Consistent with the Department’s mission, government
agencies have a responsibility of continuously improving
the value of the services that citizens receive. The
Department recognizes that in order to improve that value,
it must continuously increase the standards by which it
operates and collaborate and lead in both public and
private initiatives that are serving the needs of North
Carolinians.
PROTECTING THE PENSION PLANS
One of the primary responsibilities of the Department of
State Treasurer is to provide a safe and secure retirement
for North Carolina’s 900,000 public employees, including
teachers, police officers, firefighters and public servants.
These individuals rely on the integrity, knowledge and
judgment of the Department of State Treasurer.
The North Carolina pension plans are invested for the long
term, and are conservatively managed to protect the full
funding status. This keeps our state prepared to pay out
obligatory pension benefits.
The combined pension plans’ assets were valued at
$87.57 for the fiscal year ending June 30, 2015. The fund
returned an average annual gain of 5.98 percent and 8.53
percent over the last 5 years and 7 years, respectively. The
Department’s investment policy developed, in consultation
with the Investment Advisory Committee, has helped the
state pension fund outperform most large public pension
funds, with lower risk and cost.
MAINTAINING THE STATE’S AAA BOND RATING
A triple-A bond rating indicates that North Carolina has
followed well-defined financial management policies and
demonstrated strong debt management practices. Standard
and Poor’s, Moody’s Investors Service, and Fitch Ratings
– three primary bond rating agencies – all reaffirmed the
“AAA” rating for North Carolina in the 2014-15 fiscal year.
While maintaining this strong rating is a good sign of the
state’s fiscal health, federal budget deficits may present a
challenge to sustaining the triple-A rating. Bond ratings are
largely dependent on the economic stability and diversity
of revenues, conservative debt management, administrative
capabilities, fiscal performance and financial condition,
including funding of long-term benefit programs such as the
retirement systems and health care. At June 30, 2016, the
State had a “Triple-A” rating, the highest rating attainable,
from all three national rating agencies. Only nine other
North Carolina State Treasurer’s Annual Report • 2015-2016 | 9
DEPARTMENT OVERVIEW
states enjoyed this distinction. These ratings have enabled
the State to sell its bonds at interest rates considerably
below the Bond Buyer’s Index, thereby providing
tremendous savings to North Carolina’s taxpayers.
In addition, the Division staffs the State’s Debt Affordability
Committee and drafts an annual Debt Affordability Study,
which provides the General Assembly with an overview of
the State’s debt load and borrowing capacity. The February
1, 2016 Study determined that the State’s annual General
Fund debt capacity was approximately $209 million in
fiscal year 2016. The Study also provided an estimate of the
annual debt capacity for the transportation funds (the State
Highway Fund and Highway Trust Fund) and projected that
there is approximately $240 million of new transportation
debt capacity.
PROMOTING FINANCIAL EDUCATION
The Department of State Treasurer is committed to
helping North Carolina families increase their personal
understanding of finances and ability to grow personal
wealth. Financial education helps provide citizens of all
ages with the information and resources to manage their
finances and make financial decisions.
This year was one of renovation, focused on rebuilding
the Department’s voice and position on specific financial
education initiatives. Our financial education outreach
touched 15 statewide issue areas through opportunities
that were responsive to the Department’s strategic goal.
The year’s highlights included promoting the federal
earned income tax credit and free tax preparation, a press
conference to increase awareness around the NC 529
savings plan, and celebrating financial literacy month across
the state with conversations with students about managing
money wisely.
Future plans include integrating financial education into the
Department’s operations and member outreach, specifically
with the State Health Plan and Retirement Services Division;
beginning to plant seeds for future work with the ABLE
program; and continuing financial education support for
higher education and Department employees.
LOCAL GOVERNMENT FINANCE TRAINING
In early, 2016, State and Local Government Finance division
staff began talking with the Community College System about
the need for more regionally available training for finance
staff in our local governments, particularly those staff that
do not have a formal accounting education. With funding
granted by the General Assembly in the budget revisions
for 2016-2017, we began development of a pilot program
to be offered at four colleges beginning January, 2017.
Asheville-Buncombe Technical Community College, Beaufort
County Community College, Johnston Community College,
and Rowan-Cabarrus Community College will all offer the
class in a hybrid learning model – part online and part live
instruction.
The General Assembly also, with the adoption of H 1035,
gave the Local Government Commission the authority to
require mandatory training as needed for finance officials. It
is our intent to recommend to certain local governments that
their finance staff attend the pilot program being offered by
one of these four institutions. These local governments will
be selected based on our evaluation of their audited financial
reports, input from the COACH team, and input from other
staff that have worked with each unit. After the initial pilot
is complete we plan to evaluate and retool the program as
needed before launching it across the State.
CONFERENCE ON SUSTAINABILITY IN LOCAL
GOVERNMENT
On April 7, 2016, the North Carolina Department of the State
Treasurer hosted a conference on “Sparking Sustainability
and Innovation: Together, Let’s Build a Stronger Future”.
The conference was designed to foster discussion around
how innovation and sustainability are integral to creating
and maintaining long-term stability for North Carolina
communities. Representatives from across the State
participated in the conference to hear speakers from the
public, private, and non-profit sectors.
The conference discussed sustainability in the broadest
possible sense, based on the understanding that sustainable
local governments are not built by one idea, one group, one
principle or one philosophy. Rather, they are built by many
elements of the unit working together interdependently
with a belief that all are necessary to make their community
sustainable – local governments capable of surviving and
thriving over the passage of time.
There were four central themes to the conference: strategies
for innovation and sustainability; a snapshot of efforts that
support innovation and sustainability around the State;
financing sustainable and innovative initiatives; and the
future of sustainability for North Carolina local governments.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 10
DEPARTMENT OVERVIEW
ENHANCING ACCOUNTABILITY OF
DEPARTMENT SERVICES
The Department of State Treasurer strives to manage
current operations efficiently and effectively, including
providing solid customer service to the citizens of the
State. The Department and all government agencies, have
a fiduciary responsibility to the citizens we serve to see
that their resources are used in accordance with the laws
and regulations and to demonstrate that it serves the best
interests of North Carolinians. This is necessary to ensure
public confidence and maintain public support for needed
government services.
PUBLISHED CORPORATE GOVERNANCE REPORT
The Department of State Treasurer published its first
Corporate Governance Report in October of 2015. This
report contains information on how the Department has
engaged with companies since mid-2008 to jointly improve
their performance and the value of the Department's
investments.
This report reflects four areas of focus for the Department:
expressing a commitment to corporate board accountability
by engaging with companies and filing shareholder
resolutions; maintaining shareholders' rights in litigation
when necessary; advancing diversity of perspectives
across the financial system; and encouraging companies
to transparently disclose important information. The report
also includes data and analysis about how the Department
has voted on more than 10,000 resolutions per year at
companies' annual meetings.
WORKSITE WELLNESS
The State Health Plan covers members at approximately
3,200 worksite locations throughout the state and beyond.
In order to support members’ health habits, the Plan
recognizes the importance of worksite wellness programs.
These programs go beyond the habits of an individual by
improving the work environment and culture to support
healthy behaviors. The Plan developed two initiatives to
foster worksite wellness throughout public worksites: the
Wellness Champions Program and Wellness Wins pilot
program. The Wellness Champions program began in
April 2015 and encourages wellness advocates to act to
improve the health of their workforce and report to the Plan
North Carolina State Treasurer’s Annual Report • 2015-2016 | 11
Improving Claims
Experience
in Unclaimed
Property
During the 2015-16 fiscal year, the
Unclaimed Property Division made
enhancements to the automated claims
processing service, “Eclaims” which
Treasurer Cowell launched in January
2015. These enhancements further
improved the Department’s ability to
provide paperless processing of claims
that meet certain criteria through the
NCCash.com website.
In 2015-16, the first full fiscal year of
implementation of the automated
service, a total of 91,912 claims were
paid, returning more than $56 million
to the rightful owners. Of those claims,
54,349 (59 percent) were submitted
and approved online, with less than 10
business days turnaround time
for payment.
Behind each of those claims is a
unique story of an individual being
reunited with their property. For
some, it means a little extra spending
money. For others, the news of a little
more money to help with expenses is
met with much more excitement. Ms.
Georgette Houghton was one of those
individuals. Ms. Houghton recently
had to leave her job to take care of her
84 year old mother who has multiple
health issues. After learning that her
name was listed on the NCCash.com
website, Ms. Houghton contacted the
Unclaimed Property Division to initiate
the claims process. Ms. Houghton
shared her appreciation for staff
facilitating the return of her funds in
a letter to the Department. She had
$1340 due to her in proceeds from the
sale of stock she held with a former
employer. Ms. Houghton stated that
learning of the existence
of the money was a pleasant and timely
surprise as she was in need of the
money to help, “with daily survival”.
Ms. Houghton’s story serves as a
reminder of the importance of the work
that staff members do every day to
locate owners and reunite them with
their property.
...She was in
need of the
money to help
with daily
survival.
SPOTLIGHT
DEPARTMENT OVERVIEW
quarterly to earn prizes to support their program. Through
December 2015, there were a total of 167 registered
Wellness Champions with a reach of over 21,000 Plan
members. Another of these initiatives is the Wellness
Wins pilot program. One of the goals of Wellness Wins
is to support member health by establishing sustainable
worksite wellness programs at state worksites in Greene,
Lenoir, and Jones counties. Members in these counties
exhibit a higher disease burden than members in the rest
of the state. The pilot gained traction in 2015 with the
recruitment of three public schools, four agencies, and
one community college to participate in the area. Moving
forward, the Plan is aiming to recruit 12 additional school
worksites before the end of 2016.
ASSISTING LOCAL GOVERNMENTS WITH
FINANCES
The State and Local Government Finance Division
monitors fiscal and accounting standards prescribed for
local governmental units by State law. Each unit of local
government is to have its accounts audited annually by a
Certified Public Accountant or by an accountant certified
by the Department’s Local Government Commission. As
a part of its role in assisting local units and monitoring
their fiscal programs, the Division provides guidance in
following generally accepted accounting principles. Each
local government is required to file a copy of its annual
audit report with the Division and submit all audit invoices
to the Division for approval.
In fiscal year 2015-16, staff issued 23 public memoranda
directed to local governments, auditors and the
State’s public finance community. Topics included the
implementation of the new financial reporting standards for
GASB Statement 68, implementation of GASB Statement
72, secondary market disclosure requirements, accounting
for grant funded revolving loan funds, and the annual
statistical reports.
evidence indicating that small, emerging investment firms
outperform their larger competitors. The Department
of State Treasurer has also made advancing a culture
of diversity a strategic objective. The Department is
committed to working with historically under-utilized
businesses (HUBs) to the extent possible without
compromising superior risk-adjusted returns.
INNOVATING AND MODERNIZING
OPERATIONS
The Department of State Treasurer works to find
new ways to deliver services and value, including
expanding or restructuring responsibilities. It is
important to balance resource investments in ensuring
a stable and reliable business infrastructure while also
leveraging new public or private solutions that could
have a meaningful impact on the services that are
provided to the citizens of North Carolina. Creating and
supporting a culture of innovation can also help attract
the best talent to the Department.
IMPROVEMENTS TO THE STATE HEALTH PLAN
ENROLLMENT ONLINE EXPERIENCE
A primary goal for the State Health Plan this year was
to improve the online experience within the enrollment
system, eEnroll, and complement one of the Plan’s
strategic priorities: Improving the Member’s Experience.
The State Health Plan’s Eligibility and Enrollment partner
was able to conduct focus groups and usability testing in
order to launch a new and enhanced online enrollment
experience that is set to be available to State Health Plan
members in September 2017.
ENCOURAGING ENGAGEMENT IN HEALTH CARE
The Patient Centered Medical Home (PCMH) pilot is a
two-year pilot designed to promote high quality care
and improve the health care experience for members
receiving medical care from participating practice groups.
The PCMH pilot uses an alternate payment model to
apply a per member per month (PMPM) fee based on
a practice’s assignment to one of four tier levels, as
determined by baseline assessments for quality and
engagement. Four practices partnered with the Plan
in 2015: CaroMont Medical Group, Eagle Physicians,
and Carolinas Healthcare Associates (New Hanover
Medical Group) began in May, and Novant Medical
Group began in August. Collectively, the pilot impacted
22,640 members through service provided by over 900
providers. Practices utilized data and care coordination
support from the Plan to implement quality improvement
strategies to achieve targets mutually set with the
Plan for required and optional clinical quality metrics.
The required metrics address diabetes management,
asthma management, and utilization measures including
Emergency Department visits, avoidable inpatient
hospitalizations, readmission rates, radiology costs,
and engagement with the provider and practice
North Carolina State Treasurer’s Annual Report • 2015-2016 | 12
DEPARTMENT OVERVIEW
care coordinator. Practices self-selected
up to five optional metrics
addressing preventive health, to
include influenza vaccination, and
tobacco, depression, mammogram,
and colorectal cancer screening, as
well as coronary artery disease, heart
failure, hypertension, and diabetes.
Early results at the close of 2015
demonstrated improvement in many
quality metrics from the baseline.
It has also become evident that
additional strategic data analysis,
innovative and individualized
approaches to member engagement
and continuous quality improvement
efforts are required to help practices
meet their quality improvement
targets.
Supplemental Plan Awards
Small The Supplemental Retirement Plans NC 403(b) Program was
recognized in 2015 by the National Association of Government Defined
Contribution Administrators (NAGDCA) and granted two prestigious national
awards for leadership.
The first recognition was in Participant education/effective communication
for the “Golden Ticket” Annual Benefits Statement Follow-up Educational
Campaign, which resulted in 9.7% of
targeted employees increasing their
plan contribution level.
The second award was for Plan
design and administration. This
focused on “Year End Transition”
plans that included an unbundling
of the plans’ custody arrangement. These changes were designed to increase
the transparency of the plans’ administration, decrease overall plan fees, and
restructure the NC DST’s vendor relationships.
Two prestigious
national awards
for leadership
granted
SPOTLIGHT
North Carolina State Treasurer’s Annual Report • 2015-2016 | 13
RETIREMENT SYSTEMS DIVISION
14 North Carolina State Treasurer’s Annual Report • 2015-2016
R E T I R E M E N T SYS T E M S D I V I S I O N
The Retirement Systems Division (RSD) of the
Department of State Treasurer administers the North
Carolina Retirement Systems retirement benefits,
death and disability benefits and the NC Supplemental
Retirement Plans (voluntary, defined contribution plans)
created under North Carolina state law. These plans and
programs, collectively referred to as the NC Total Retirement
Plans, cover the vast majority of active and retired public
employees in the state.
The North Carolina Retirement Systems Division provides
benefits to more than 900,0001 members, including:
• Teachers
• State Government Employees
• Local Government Employees
• Firefighters
• Rescue Squad Workers
• Judges
• Law Enforcement Officers
• National Guard Members
• State Legislators
• Registers of Deeds
• Other public workers
A key purpose of the retirement systems and benefit plans is
to assist public employers in attracting and retaining high-quality
employees by providing valuable post-employment
benefits, including replacement income at retirement, as
well as death, disability, and survivor benefits. RSD staff
members continuously review features and options within
the benefit plans to ensure that all promised benefits are
attainable over time and are an efficient use of employees'
and taxpayers' contributions.
The Division is also responsible for communicating the
Treasurer’s retirement readiness mission — that all public
employees become “retirement ready” by being able to replace
80% of their pre-retirement income for each year of their
retirement, starting as early as age 62. As of December 31, 2015,
60.48% of all active North Carolina public servants are on track
to replace 80% of their income in retirement, starting at age 62.
The total assets of all state-administered pension funds
were valued at $89.8 billion2 as of June 30, 2016.
The total number of retirees receiving benefits for the year
ending June 30, 2016, was 277,584. The total dollar amount
of benefits paid for year ending June 30, 2016, was $5.8
billion, up from $5.6 billion in the previous fiscal year.
The Retirement Systems Division administers seven retirement systems and several smaller systems and supplemental
pension funds:
SYSTEM NUMBER OF
MEMBERS3
ASSETS4
AS OF 6/30/16
TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM (TSERS) 657,558 $65.2 Billion
LOCAL GOVERNMENTAL EMPLOYEES' RETIREMENT SYSTEM
(LGERS) 247,373 $23.5 Billion
CONSOLIDATED JUDICIAL RETIREMENT SYSTEM (CJRS) 1,253 $544.5 Million
LEGISLATIVE RETIREMENT SYSTEM (LRS) 560 $27.3 Million
FIREFIGHTERS’ AND RESCUE SQUAD WORKERS' PENSION FUND
(FRSWPF) 56,430 $388.5 Million
NATIONAL GUARD PENSION FUND (NGPF) 15,752 $113.1 Million
LEGISLATIVE FUND (LF) (Closed to new entrants) 5 $0.0 Million
REGISTERS OF DEEDS' SUPPLEMENTAL PENSION FUND (RDSPF) 196 $53.6 Million
1 Actual member counts can be found in the actuarial valuations for each retirement system. All valuations are posted on the State Treasurer’s website here:
https://www.nctreasurer.com/ret/Pages/Valuation-Reports.aspx
2 Unaudited figures. Audited total asset amounts will appear in the FY 2016 Comprehensive Annual Financial Report, available here: http://www.osc.nc.gov/financial/
3 Member counts reflect 2015 calendar year values as of valuation date (12/31/2015).
4 Unaudited figures. Audited figures will appear in the Comprehensive Annual Financial Report, available here: http://www.osc.nc.gov/financial/
North Carolina State Treasurer’s Annual Report • 2015-2016 | 15
R E T I R E M E N T SYS T E M S D I V I S I O N
The Division also offers a number of supplemental plans and benefit programs.
TYPES OF SUPPLEMENTAL
PLANS/PROGRAMS
BENEFIT/SERVICE
Disability Benefits Provides equitable replacement income for eligible members of TSERS who are temporarily or
permanently disabled, as well as for LGERS members who are permanently disabled.
Social Security Benefits
Administers the state’s responsibility under the Social Security Agreement of July 16, 1951, which
is an agreement between the federal government and the state government allowing local
governments and other instrumentalities of the state to participate in Social Security.
Employee Death Benefits
Provides group death benefits for members of TSERS, CJRS and LGERS. These benefits include:
death benefits for active employees in TSERS, CJRS, LRS and LGERS; the Separate Insurance
Benefits Plan for active and retired state and local governmental law enforcement officers; and the
line-of-duty death benefit for certain civil service and emergency services workers.
Supplemental Retirement Income
Plan – (NC 401(k) Plan)
Provides members with voluntary retirement savings plan to supplement retirement income.
Public Employee Deferred
Compensation Plan – (NC 457 Plan)
Provides members with voluntary retirement savings plan to supplement retirement income.
Public School Teachers’ and
Professional Educators’ Investment
Plan – (NC 403(b) Program)
Provides teachers and school employees a voluntary retirement savings plan to supplement
retirement income.
Supplemental Retirement Income
Plan – (NC 401(k), NC 457 Plans)
Enables members to receive an additional monthly benefit from TSERS, LGERS, CJRS, or LRS by
transferring all or a portion of the balance in their NC 401(k) and/or NC 457.
NC Able Program
The Achieving a Better Life Experience (ABLE) Act allows people with disabilities to save money
in a 529A account for qualified medical expenses, similar to the tax-deferred accounts used by
families to save for their children’s college educations. This new type of 529 account allows people
with disabilities to save (and their family members, friends and others to contribute) money in
a 529A account for qualified disability expenses, similar to the tax-deferred accounts used by
families to save for their children’s college educations.
Contributory Death Benefit for
Retired Members
Offers an optional benefit that gives retirees a one-time death benefit of up to $10,000.
Supplemental Insurance Provides retired members with optional supplemental insurance (i.e., dental, vision, ID theft
protection, critical illness, accident or life).
Retiree Health Benefits Acts as the Health Benefits Representative for retired members covered under the State Health
Plan of North Carolina.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 16
R E T I R E M E N T SYS T E M S D I V I S I O N
LEGISLATIVE HIGHLIGHTS
The 2016 Session of the North Carolina General Assembly
enacted the following retirement-related legislation:
• Full funding for the Actuarially Determined Contributions
of the retirement systems.
• Payment of one-time pension supplement of 1.6% of
annual benefits to current TSERS, CJRS and LRS retirees.
• Elimination of the Qualified Excess Benefit Arrangement
(QEBA) sunset for members hired on or before Jan. 1, 2015.
• Line-of-Duty Death Survivorship Benefit provided
for Firefighters’ and Rescue Squad Workers’ Pension
Fund members.
• Clarified retirement public records law by consolidating
nine different public records statutes and three opinions
from the Department of Justice related to retirement
records into the retirement statutes.
DEFINED BENEFIT PLAN AWARDS
The Teachers’ and State Employees’ Retirement System
(TSERS) and the Local Governmental Employees’ Retirement
System (LGERS) were recognized with two awards in 2015,
the most current year available, by the Public Pension
Coordinating Council (PPCC). The PPCC is a coalition of
three national associations that represent public retirement
systems and administrators: the National Association of
State Retirement Administrators, the National Council on
Teacher Retirement, and the National Conference on Public
Employee Retirement Systems.
The first, the Recognition Award for Public Pension
Administration, recognizes that TSERS and LGERS meet
the PPCC’s Public Pension Standards in five areas of
assessment.
1. Comprehensive benefit program: TSERS and LGERS
offer benefits including service retirement benefits, in-service
death benefits, disability benefits, vesting, and
provisions for granting cost-of-living adjustments.
2. Actuarial: actuarial valuations completed annually.
3. Audit: NCRS regularly obtains an unqualified opinion
from an independent audit in accordance with
government auditing standards
4. Investments: NCRS follows written investment policies
and written fiduciary standards, and obtains quarterly
investment performance evaluations from the Investment
Advisory Committee.
5. Communications: NCRS annually produces and
distributes benefit handbooks and annual benefit
statements for all members, and the governing boards of
NCRS meet quarterly.
The second award, the Recognition Award for Public
Pension Funding, recognizes TSERS and LGERS for
meeting the requirements for funding adequacy by making
contributions to the pension funds equal to or greater than
100% of the actuarially determined contribution each year.
These Public Pension Standards serve as a benchmark by
which to measure public defined benefit plans. All public
retirement systems and the state and local governments
that sponsor them are encouraged to meet these standards.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 17
INVESTMENT MANAGEMENT
18 North Carolina State Treasurer’s Annual Report • 2015-2016
I N V E S T M E N T MANAGEMENT D I V I S I O N
The Investment Management Division (“IMD”) serves as the investment arm for the Department of State Treasurer. This
Division employs over 30 investment professionals who provide the expertise for state government investing. IMD
is responsible for the management of the Short Term Investment Fund (“STIF”), the Pension Fund Investment Program
(“Pension Fund”), and the Ancillary Governmental Participant Investment Program (“AGPIP”). At the end of the fiscal year
ending June 30, 2016, total assets of these programs were $104.77 billion.
INVESTMENT PROGRAMS1
Pension Fund
Assets of the North Carolina Retirement Systems2 defined in N.C.G.S. 147-69.2(b)
(8)
(the "Retirement Systems").
85.59%
STIF
An internally managed portfolio of highly liquid fixed income securities. Investors
include the State’s General Fund, Highway Trust Fund, certain Retirement Systems
funds,3 and other investors.
14.35%
AGPIP
Assets invested in programs such as the Escheat Fund, Public Hospital Funds,
Local Government Other Post-Employment Benefits Funds, and other
non-Retirement Systems investors.
2.06%
1 See Statistical Tables, Table 2 (Summary of Investments by Participants) and its attached footnote for further details and an explanation of the differences in
terminology between different reports.
2 The Retirement Systems are the Teachers’ and State Employees’ Retirement System, the Consolidated Judicial Retirement System, the Firefighters’ and Rescue
Squad Workers’ Pension Fund, the Local Governmental Employees’ Retirement System, the Legislative Retirement System, the North Carolina National Guard
Pension Fund, and the Retiree Health Benefit Fund.
3 In this table and in Table 2 of the Statistical Tables, Retirement Systems assets in the STIF are listed within the “Short-Term Investment Fund” row only if held
in the operating accounts used to meet cash needs for payment of items such as member benefits and administrative expenses. All other Retirement Systems
assets in the STIF are listed under “Pension Fund Investment Program.”
The Treasurer is directed by statute to establish, maintain,
administer, manage and operate investment programs for
all funds on deposit, pursuant to the applicable statutes. In
doing so, the Treasurer has full powers as a fiduciary and,
with IMD staff, manages the investment programs so assets
may be readily converted into cash when needed.
In establishing the comprehensive management program,
the State Treasurer, utilizing a professional investment staff,
has developed an investment strategy for each portfolio
that recognizes the guidelines of the governing General
Statutes and provides appropriate diversification. In
addition to the Treasurer and IMD staff managing these
programs, the Investment Advisory Committee (“IAC”)
provides opinion on policies and general strategy for
achieving investment results of the Pension Fund, including
asset allocation, in consultation with IMD staff.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 19
I N V E S T M E N T MANAGEMENT D I V I S I O N
SHORT -TERM INVESTMENT FUND
The objective of the STIF is to maximize income consistent with the principles of preservation of capital and liquidity.
The STIF is an internally managed portfolio of highly liquid fixed income securities. These securities are primarily money
market instruments and short- to intermediate-term U.S. Treasuries and Agencies. All bank accounts of the State Treasurer
are included in this portfolio, which serves as the main operating account for state agencies. Because the Treasurer’s cash
balances are ultimately subject to disbursement upon presentation of valid warrants, the primary consideration in making
investments is safety and liquidity; the secondary consideration is income. For the fiscal year 2016, the STIF generated a
cash return of 0.75 percent. The following graph1 provides the STIF’s asset allocation as of June 30, 2016.
STIF ASSET ALLOCATION AS OF JUNE 30, 2016
U.S. Treasuries
40.1%
Repurchase Agreements
15.5%
U.S. Agencies
44.3%
* Definitions:
U.S. Treasuries – government debt issued by the United States Department of the Treasury
Certificates of Deposit – financial product commonly offered to consumers by banks, thrift institutions and credit unions
Repurchase Agreements – short-term collateralized loan
U.S. Agencies – debt from a federal government agency or government sponsored enterprise such as the Government National
Mortgage Association (GNMA or Ginnie Mae), the Federal National Mortgage Association (FNMA or Fannie Mae), the Federal Home Loan
Mortgage Corporation (FHLMC or Freddie Mac), Federal Home Loan Banks and Federal Farm Credit Banks
1 This STIF asset allocation does not include cash in bank.
Certificate of Deposit
0.1%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 20
I N V E S T M E N T MANAGEMENT D I V I S I O N
The following chart provides historic returns for STIF as of June 30, 2016.
STIF FISCAL YEAR PERFORMANCE
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
6.0%
4.0%
2.0%
0.0%
STIF TOP TEN POSITIONS AS OF JUNE 30, 2016
Issuer Coupon Maturity Date Par Value ($)
SOUTH STREET REPO 0.520 7/1/2016 1,800,000,000
SOUTH STREET REPO 0.650 7/1/2016 700,000,000
U S TREASURY NOTE 0.500 7/31/2016 650,000,000
U S TREASURY NOTE 0.500 8/31/2016 650,000,000
U S TREASURY NOTE 0.500 9/30/2016 650,000,000
U S TREASURY NOTE 0.375 10/31/2016 650,000,000
U S TREASURY NOTE 0.500 11/30/2016 650,000,000
U S TREASURY NOTE 0.500 1/3/2017 650,000,000
U S TREASURY NOTE 0.500 2/28/2017 650,000,000
U S TREASURY NOTE 0.500 3/31/2017 650,000,000
4.7%
5.2%
3.4%
1.6%
1.0%
0.6% 0.8%
0.4% 0.4% 0.5%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 21
I N V E S T M E N T MANAGEMENT D I V I S I O N
STIF Summary of Brokers Utilized During Fiscal Year 2015-16
Brokers are used to execute buy and sell orders on behalf of the fund. Below is a list of brokers used to facilitate trades of
securities during the fiscal year ending June 30, 2016.
Bank of America
BNP Paribas
CastleOak Securities
Citigroup
Deutsche Bank Securities
First Tennessee Bank
HSBC Securities
Jefferies & Company
JPMorgan Chase
Loop Capital
Mizuho Securities
Morgan Stanley
Raymond James
RBC Capital Markets
RBS Greenwich Capital
South Street Securities
Stifel Nicholaus
Suntrust Capital Markets
Wells Fargo Securities
Williams Capital
PENSION FUND INVESTMENT PROGRAM REVIEW
The Investment Management Division’s goal is to maintain
the long-term strength of the Retirement Systems by
providing a long-term rate of return that approximates
the actuarial rate of return while simultaneously managing
risk in the portfolio. The Division conducts its activities
in accordance with the Investment Policy Statement for
North Carolina Retirement Systems, which is approved by
the Treasurer in consultation with the Investment Advisory
Committee. This policy covers investment objectives, asset
allocation ranges, rebalancing processes and other issues.
It is the policy of the Treasurer to invest consistent with the
following objectives:
A. Provide investment returns sufficient for the Pension Fund
to make timely payment of statutory benefits to current and
future members and keep contribution rates at a reasonable
level over the long-term. To achieve this, long-term
projected investment returns should be generally consistent
with the actuarial assumed rate of return, unless otherwise
determined by the Treasurer.4
B. Avoid excessive volatility in contribution rates over the
intermediate-term by maintaining a moderate risk profile
and diversifying with respect to economic and financial risk
factors. It is acceptable to limit the use of return-seeking
strategies in order to avoid excessive volatility.
C. Additionally:
1. Achieve cost-efficiency in the overall investment program
2. Exceed composite benchmark returns for the Pension Fund
and broad categories of investments within reasonable risk
limits and over market cycles
3. Ensure sufficient liquidity to meet the Pension Fund’s
obligations over all time periods
4. Comply with all governing statutes as consistent with
fiduciary obligations
North Carolina’s defined benefit plans are consistently
ranked in the top ten of state retirement funding ratios.
4 The Retirement Systems’ actuary advises each applicable Retirement System’s Board of Trustees (or in the case of the Retiree Health Benefit Fund, the
Committee on Actuarial Valuation of Retired Employees’ Health Benefits) with respect to setting the actuarial assumed rate of return and annual required
contributions. These boards and the committee have been granted the authority by the legislature to set the actuarial assumed rate of return for the Fund,
which is currently 7.25% for the Retirement Systems other than the Retiree Health Benefit Fund and 4.25% for the Retiree Health Benefit Fund.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 22
I N V E S T M E N T MANAGEMENT D I V I S I O N
Operating Policy
In all transactions executed for any investment program managed by the State Treasurer, the objective is to perform such
business in the best interest of the beneficial owners of the trusts’ assets, which for the Pension Fund are North Carolina’s
participating public employees, teachers, firefighters, police officers and other public workers.
In order to meet the investment objectives, a “Strategic Asset Allocation” is established through consideration of the Pension
Fund’s projected actuarial liabilities, liquidity needs, risk tolerance, and the role that different asset categories and strategies
are expected to play in the overall portfolio construction. The Strategic Asset Allocation will be reviewed no less than annually
and a detailed asset-liability study will be conducted no less than triennially, assuming that benefit design and funding policy is
unchanged. The current Strategic Asset Allocation, consisting of targets and authorized ranges, is detailed below.
Range
Row Labels Target Minimum Maximum
Growth 58.0% 37.0% 71.0%
Public Equity 42.0% 37.0% 47.0%
Non Core Real Estate 3.0% 0.0% 8.0%
Opportunistic Fixed Income 7.0% 0.0% 7.5%
Private Equity 6.0% 0.0% 8.75%
Inflation Sensitive & Diversifiers 11.0% 4.0% 16.0%
Core Real Estate 5.0% 2.0% 10.0%
Inflation Sensitive 6.0% 2.0% 7.5%
Multi-Strategy 2.0% 0.0% 4.0%
Rates & Liquidity 29.0% 24.0% 42.0%
Cash 1.0% 0.0% 10.0%
Investment Grade Fixed Income 28.0% 24.0% 32.0%
More information on Pension Fund asset types is available in the “Investment Policy Statement for North Carolina
Retirement Systems”. The Investment Policy Statement may be found on the Department of State Treasurer’s website
at https://www.nctreasurer.com/inv/Policies/InvestmentPolicyForNCRetirementSystems.pdf. A website page at
https://www.nctreasurer.com/inside-the-department/OpenGovernment/Pages/Department-Policies.aspx provides links
to the Investment Policy Statement and other Investment Management Division policies.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 23
I N V E S T M E N T MANAGEMENT D I V I S I O N
Pension Fund Strategy
The tradition of conservative fiscal management has served North Carolina’s public workers and taxpayers well throughout
the years. The Pension Fund continues that tradition with a significant allocation in fixed income assets (bonds) combined
with reasonable exposure to more volatile growth-oriented assets and an increasingly diversified portfolio. The result of
this strategy is a fund that is a top performer in turbulent economic and financial market environments, but obtains lower
returns than the typical large public fund peer in bull markets. The below chart outlines the one-, three-, five- and 10-year
average returns and exposure to risk within the different percentiles of public funds in comparison to the performance and
exposure to risk of the North Carolina Pension Fund.
NATIONAL AVERAGE GROSS OF FEES RETURNS AND EXPOSURE TO RISK
Returns 1 Year 3 Year 5 Year 10 Year
25th Percentile 1.37 7.19 7.08 6.00
Median 0.43 6.48 6.43 5.67
75th Percentile -0.58 5.69 5.74 5.18
NC Pension Fund 1.45% 6.75% 6.56% 6.00%
Risk*
25th Percentile 9.10 7.32 7.98 10.43
Median 7.76 6.17 7.36 9.78
75th Percentile 6.71 5.76 6.58 9.03
NC Pension Fund 6.39 5.42 6.16 8.18
Source: BNY Mellon Total Funds – Public Funds $1+ billion (Gross of Fees)
* Volatility of returns (Standard Deviation)
North Carolina State Treasurer’s Annual Report • 2015-2016 | 24
I N V E S T M E N T MANAGEMENT D I V I S I O N
Total Pension Fund Structure
As of June 30, 2016, the Pension Fund maintained a market value of $87.6 billion. IMD is constantly monitoring the overall
Pension Fund in an effort to manage risk. The following chart highlights the strategic asset allocation targets over the past
seven years.
CURRENT AND HISTORICAL STRATEGIC TARGETS
June 2010 June 2011 June 2012 June 2013 June 2014 June 2015 June 2016
Growth
Public Equity 48.5% 40.5% 40.5% 40.5% 40.5% 42.0% 42.0%
Non-Core Real
Estate 3.6% 4.8% 4.8% 4.8% 4.8% 3.0% 3.0%
Opportunistic
Fixed Income 1.5% 4.5% 4.5% 4.5% 4.5% 7.0% 7.0%
Private Equity 3.15% 4.5% 4.5% 4.5% 4.5% 6.0% 6.0%
Inflation Sensitive
and Diversifiers
Core Real Estate 2.4% 3.2% 3.2% 3.2% 3.2% 5.0% 5.0%
Inflation
Sensitive 1.5% 4.5% 4.5% 4.5% 4.5% 6.0% 6.0%
Multi-Strategy 1.35% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Rates and Liquidity
Investment
Grade Fixed
Income
38.0% 36.0% 36.0% 36.0% 36.0% 28.0% 28.0%
Cash Portfolio 0.0% 0.0% 0.0% 0.0% 0.0% 1.0% 1.0%
IMD utilizes rebalancing to ensure the overall portfolio weights stay in line with the target ranges. Asset allocation and
a disciplined approach to rebalancing are important tools to help control the level of risk that an investment portfolio
experiences.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 25
I N V E S T M E N T MANAGEMENT D I V I S I O N
PENSION FUND ASSET ALLOCATION AS OF JUNE 30, 2016
Market Value
($000) Portfolio Weight Target Range
Minimum Maximum
Growth $50,797,799 58.00% 58.0% 37.0% 71.0%
Public Equity 37,256,098 42.5% 42.0% 37.0% 47.0%
Non-Core Real
Estate 3,906,419 4.5% 3.0% 0.0% 8.0%
Opportunistic
Fixed Income 5,259,505 6.0% 7.0% 0.0% 7.5%
Private Equity 4,375,777 5.0% 6.0% 0.0% 8.75%
Inflation Sensitive
and Diversifiers 9,639,160 11.0% 11.0% 4.0% 16.0%
Core Real Estate 4,446,703 5.1% 5.0% 2.0% 10.0%
Inflation
Sensitive 5,192,457 5.9% 6.0% 2.0% 7.5%
Multi-Strategy 1,617,323 1.8% 2.0% 0.0% 4.0%
Rates and Liquidity 25,515,800 29.2% 29.0% 24.0% 42.0%
Cash 854,436 1.0% 1.0% 0.0% 10.0%
Investment
Grade Fixed
Income
24,661,364 28.2% 28.0% 24.0% 32.0%
Grand Total 87,570,083 100.00%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 26
I N V E S T M E N T MANAGEMENT D I V I S I O N
Total Fund Performance
The Pension Fund has underperformed its implementation
benchmark by 0.5% over the past fiscal year. The following
chart provides fiscal year returns for each asset class
within the total Pension Fund.
For the fiscal year 2016, the Pension Fund returned
0.81 percent, net of fees. The charts below provide
a snapshot for the total Pension Fund’s annualized
performance and performance by asset class for
one-, three-, five- and 10-year periods.
2015 FISCAL YEAR RETURNS
Growth 				 (2.14)%
Public Equity 			 (3.89)%
Private Equity 			 4.32%
Non-Core Real Estate 		 12.39%
Opportunistic Fixed Income 	 (4.40)%
Rates & Liquidity 			 6.97%
IG Fixed Income 		 7.25%
Cash 				 0.84%
Inflation Sensitive & Diversifiers 	 0.24%
Inflation Sensitive 		 (5.75)%
Core Real Estate 		 8.53 %
Multi-Strategy 			 (1.46)%
Total Pension Fund 		 0.81%
TOTAL PENSION FUND ANNUALIZED PERFORMANCE
Fiscal 2016 Tr. 3 Yr Tr. 5 Yr Tr. 10 Yr Tr. 15 Yr
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
0.8%
1.3%
6.1%
5.6%
6.0%
5.5% 5.5%
5.2%
5.8%
5.5%
Total Pension Fund Implementation Benchmark*
*As of June 30, 2016, the Implementation Benchmark is a blend of the Asset Class Benchmarks at policy weights. It is currently weighted
as follows: 58% Growth Benchmark, 29% Rates & Liquidity Benchmark, 11% Inflation Sensitive & Diversifiers Benchmark, and 2% Multi-
Strategy Benchmark
North Carolina State Treasurer’s Annual Report • 2015-2016 | 27
I N V E S T M E N T MANAGEMENT D I V I S I O N
The following chart details performance by asset class and also provides the benchmarks or target returns.
ANNUALIZED PERFORMANCE AS OF JUNE 30, 2016, NET OF FEES
1-Year 3-Year 5-Year 10-Year 15-Year
Growth
Benchmark1
-2.1%
-2.3%
7.3%
6.2%
6.8%
5.7%
4.7%
4.2%
5.0%
4.5%
Public Equity Investment Portfolio
Public Benchmark2
-3.9%
-3.8%
6.7%
6.1%
6.2%
5.4%
4.6%
4.1%
4.9%
4.2%
Private Equity Investment Portfolio
Benchmark3
4.3%
4.3%
10.6%
9.7%
8.8%
9.3%
7.2%
9.2%
4.2%
9.3%
Non-Core Real Estate Investment Portfolio
Benchmark4
12.4%
6.5%
15.7%
9.7%
13.6%
9.5%
3.8%
2.8%
5.1%
6.7%
Opportunistic Fixed Income Investment Portfolio
Benchmark5
-4.4%
-3.6%
2.4%
0.4%
4.8%
0.5%
5.8%
0.2%
--
Rates & Liquidity
Benchmark6
7.0%
7.9%
5.0%
5.4%
5.1%
5.3%
6.6%
6.4%
6.5%
6.3%
Fixed Income Portfolio
Benchmark7
7.3%
8.2%
5.1%
5.5%
5.2%
5.4%
6.7%
6.4%
6.5%
6.3%
Cash Portfolio
Benchmark8
0.8%
0.2%
0.6%
0.1%
--
--
--
Inflation Sensitive and Diversifiers
Benchmark9
0.2%
3.7%
2.0%
4.3%
1.4%
3.2%
0.9%
0.7%
3.4%
3.8%
Inflation Sensitive
Benchmark10
-5.8%
-3.1%
-2.7%
-1.7%
-3.6%
-3.1%
-1.0%
2.1%
2.5%
-
Core Real Estate Investment Portfolio
Benchmark11
8.5%
12.4%
8.6%
11.9%
9.3%
11.6%
4.6%
5.4%
5.9%
6.9%
Multi-Strategy Investment Portfolio
Benchmark12
-1.5%
-3.4%
5.9%
4.7%
8.5%
6.6%
5.0%
5.7%
--
Total Pension Plan
Implementation Benchmark13
Long-Term Policy Benchmark14
0.8%
1.3%
1.2%
6.1%
5.6%
5.3%
6.0%
5.5%
4.9%
5.5%
5.2%
5.2%
5.8%
5.5%
6.0%
1. The Growth Benchmark is a blend of the Public Equity Benchmark, Private Equity Benchmark, Non-Core Real Estate Benchmark, & Opportunistic FI Benchmark at policy weights.
2. The Public Equity Benchmark is the dynamically weighted combination of the MSCI ACWI IMI Net (Long-Only) and a beta adjusted MSCI ACWI IMI Net (Hedged Equity).
3. The Private Equity Benchmark is comprised of the following Burgiss Group Private iQ indices: 50% Buyout, 20% Venture Capital, and 30% Special Situations and Distressed
Securities.
4. The Non-Core Real Estate Benchmark is comprised of the following Burgiss Group Private iQ indices: 80% U.S. Non-Core Real Estate (Opportunistic and Value-Added) and
20% Non-U.S. Non-Core Real Estate (Opportunistic and Value-Added).
5. The Opportunistic Fixed Income Benchmark is a comprised of 50% HFRX Distressed Securities Index, 20% HFRX Relative Value Index, 15% Credit Suisse Leveraged Loan Index,
and 15% BOAML High Yield Index.
6. The Rates & Liquidity Benchmark is a blend of the IG Fixed Income Benchmark and the Cash Benchmark at policy weights.
7. The IG Fixed Income Benchmark is comprised 10% iMoneyNet First Tier Institutional Money Market Funds Net Index and 90% custom BOAML Core Investment Grade Index. The
custom BOAML core index comprised of the following weightings: 30% BOAML 5+ Years Governments, 35% BOAML 5+ Years Investment Grade Corporates, and 35% BOAML
Mortgage Master.
8. The Cash Benchmark is the iMoneyNet First Tier Institutional Money Market Funds Net Index.
9. The Inflation Sensitive & Diversifiers Benchmark is a blend of the Inflation Sensitive Benchmark and the Core Real Estate Benchmark at policy weights.
10. The Inflation Sensitive Benchmark is the dynamically weighted combination of the Bank of America Merrill Lynch 1-3 Years U.S. Inflation-Linked Treasury Index (TIPS), the
Bloomberg Commodities Index (Commodities), and a combination of the benchmarks of investments classified within Private Natural Resources or Other Real Assets and
Diversifiers.
11. The Core Real Estate Benchmark is comprised of 80% NCREIF ODCE Net and 20% FTSE EPRA NAREiT Global Index.
12. The Multi-Strategy Benchmark is comprised of a dynamically weighted combination of the HFRX ED: Multi-Strategy Index, net of fees, and the market value weighted
benchmarks for any other total fund strategies within the Portfolio.
13. The Implementation Benchmark is a blend of the Asset Class Benchmarks at policy weights. It is currently weighted as follows: 58% Growth Benchmark, 29% Rates & Liquidity
Benchmark, 11% Inflation Sensitive & Diversifiers Benchmark, and 2% Multi-Strategy Benchmark
14. The Long-Term Policy Benchmark is comprised of 57% MSCI ACWI IMI Net, 33% BOAML 5+ Years U.S. Treasury Index, 6% Bloomberg Commodity Index, and 4% BOAML 1-3
Years U.S. Inflation-Linked Treasury Index.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 28
I N V E S T M E N T MANAGEMENT D I V I S I O N
Cost
In order to best maximize returns with limited internal
resources, the Investment Management Division utilizes
external managers for a portion of the Pension Fund.
Over time, the Department, with the advice and counsel of
the Investment Advisory Committee, has used a lower risk
and lower cost approach to investing the North Carolina
Retirement System trust funds. While costs have risen
somewhat over time as more diverse external investment
strategies were pursued, our all-in cost of investing the
retirement trust fund remains modest and we continue to
actively seek out cost-efficiencies in our operations.
During the fiscal year, the Department engaged CEM
Benchmarking, a leading independent cost and performance
analysis firm, to review our cost structure for calendar year
2015. The report showed that our cost structure was below
those of most of our institutional peers. This leads to savings
of about 9.7 bp compared to the median peer. Importantly,
after deducting all fees, incentives, and expenses for the
trust fund we exceeded our performance benchmarks,
which are a positive for plan beneficiaries, employers, and
taxpayers. At the same time, we continue to proactively
target improvements in cost-efficiency, transparency, risk
management, and compliance.
TABLE X: CALENDAR YEAR 2015 NCRS COSTS OF
INVESTMENT OPERATIONS COMPARED TO PEERS
(EXPRESSED IN BASIS POINTS WHERE 50 BASIS POINTS
EQUALS 0.50%)
		 TOTAL (bps)
Median Peer 		 54.7
NCRS 			 47.4
Percentile 		 38%
Source: CEM [Cost Effectiveness Measurement]
Benchmarking Inc., The peer group consists of 14 U.S.
public pension funds managing from $42 billion to $157.7
billion. The median peer managed $68.6 billion versus
NCRS’ $89 billion. CEM Benchmarking’s methodology
excludes carry/performance fees for private investments
because most peers do not provide such data. All such
fees and expenses have been deducted from all reported
investment returns.
Table Y provides further detail on fees and incentives
paid to external investment managers for the fiscal year.
Additional detail is available upon request.
TABLE Y: TOTAL NCRS EXTERNAL FEES PAID FY 2015-2016
Management Fees Incentive Fees Total Fees Portfolio Market
Value
Ratio of Fees to
Market Value
Public Equity $83,697,806 $ 0 $83,697,806 $37,256,098,008 0.22%
Private Equity $59,567,017 $44,525,168 $104,092,185 $4,375,776,820 2.38%
Real Estate $78,563,876 $43,819,017 $122,382,893 $8,353,122,405 1.47%
Multi-Strategy $3,462,253 $181,115 $3,643,368 $1,617,323,452 0.23%
Opportunistic Fixed
Income $53,409,769 $11,115,765 $64,525,533 $5,259,504,719 1.23%
Inflation Sensitive $47,587,522 $832,395 $48,419,917 $5,192,457,132 0.93%
TOTAL $326,288,243 $100,473,460 $426,761,703 $62,054,282,535 0.69%
* Total management fees previously reported differ from the above data due to accrual and timing issues. This includes either accruals
of management fees owed but not paid at year end or the timing difference between the actual charge and the booking of actual costs
that occurs in certain other investments.
** Consistent with industry convention, cost figures do not include the fees and expenses of investment managers that are held within
fund-of-fund vehicles. Such fees and expenses have been deducted from all reported investment returns.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 29
I N V E S T M E N T MANAGEMENT D I V I S I O N
The below table provides additional transparency into the compensation collected by investment managers within fund
of fund structures. This compensation is determined by the fund of fund manager through contracts with the underlying
manager. This compensation is deducted from all reported returns. They are not included in the compensation disclosed in
Table Y.
Management Fees Incentive Fees Market Value Ratio of Fees to
Market Value
NCRS Fund of Funds $43,830,232 $12,475,343 $2,312,844,467 2.43%
Note: Some legacy fund of funds do not disclose the compensation to underlying funds and are, therefore, not reported in the above table.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 30
I N V E S T M E N T MANAGEMENT D I V I S I O N
FIXED INCOME
As of June 30, 2016, the fixed income allocation maintained a
market value of $24.7 billion, representing 28.2 percent of the
Pension Fund. The Pension Fund’s core Long-Term Investment
Portfolio (“LTIP”) represented the bulk of the fixed income
assets with a market value of $22.2 billion. The balance of the
fixed income assets was in non-core strategies.
Core Fixed Income Structure
The LTIP is an internally managed investment grade fixed
income portfolio that takes an enhanced approach to
generating excess returns versus an assigned benchmark.
The portfolio is structured to provide a long duration
profile that better matches the pension fund’s longer
duration liability stream. Because of this approach, the
duration of the portfolio tends to be relatively long versus
an intermediate duration fixed income portfolio. Duration
is a measure of a bond’s price sensitivity to changes in
interest rates. The portfolio comprises U.S. Treasuries,
Agencies, Corporate Bonds, and Governmental National
Mortgage Association (GNMA) mortgage-backed securities.
The following charts display the allocation of the LTIP by
investment and by quality, or credit rating, of investment.
LTIP SECTOR ALLOCATION
(AS OF 6/30/16)
Cash
1.2%
Government
(U.S. Treasuries
& Agencies)
29.3%
Corporates
35.7%
LTIP QUALITY* ALLOCATION
(AS OF 6/30/16)
U.S. Agencies
(Debt & MBS)
37.8%
A
16.6%
BBB
14.8%
*Credit Quality based on Moody’s Ratings
Mortgage-Backed
33.8%
U.S. Treasuries
26.0%
High Yield
1.8%
AA
2.5%
AAA
0.5%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 31
I N V E S T M E N T MANAGEMENT D I V I S I O N
Core Fixed Income Performance
For the fiscal year, the LTIP return was 8.05 percent net of fees versus a benchmark return of 9.09 percent. The slight
underperformance to the benchmark was due to drag from cash exposures and the short duration position relative to the
benchmark.
LONG TERM INVESTMENT PORTFOLIO ANNUALIZED PERFORMANCE
8.0%
6.0%
4.0%
2.0%
0.0%
Fiscal 2015 Tr. 3 Yr Tr. 5 Yr Tr. 10 Yr Tr. 15 Yr
LTIP Custom Fixed Income Benchmark
8.1%
9.1%
5.4%
5.9%
5.4% 5.6%
6.8% 6.5% 6.6% 6.3%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 32
I N V E S T M E N T MANAGEMENT D I V I S I O N
Below are the lists of the top 10 corporate exposures within the LTIP and a summary of brokers utilized to trade securities in
the portfolio.
LTIP TOP 10 CORPORATE POSITIONS AS OF JUNE 30, 2016
Corporate Issuer % of LTIP
General Electric 0.9%
JP Morgan 0.8%
Goldman Sachs 0.8%
Wells Fargo 0.7%
Bank of America 0.7%
Wal-Mart 0.7%
Comcast 0.6%
Morgan Stanley 0.5%
HSBC 0.5%
Anheuser-Busch 0.5%
LTIP SUMMARY OF BROKERS UTILIZED DURING FISCAL YEAR 2016
Bank of America
Barclays Capital
BB&T Capital Markets
BNY Mellon
Cantor Fitzgerald
Citigroup
Credit Suisse Securities
Cross Point Capital
Deutsche Bank Securities
First Tennessee Bank
HSBC Securities
Jefferies & Company
JPMorgan Chase
KeyBanc Cap Mkts
Mizuho Securities
MarketAxess
Morgan Stanley
Raymond James
RBS Greenwich Capital
Scotia Capital
Stifel Nicolaus
SunTrust Capital Markets
UBS Securities
US Bank
Wells Fargo Securities
Non-Core Fixed Income Structure
The non-core component consists of a liquidity allocation to
the Short-Term Investment Fund.
As of June 30, 2016, the allocation to STIF was $2.50 billion.
Non-Core Fixed Income Performance
The non-core fixed income composite posted a return of
0.71 percent for the fiscal year.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 33
I N V E S T M E N T MANAGEMENT D I V I S I O N
PUBLIC EQUITY
The Public Equity portfolio ended fiscal year June 30, 2016
at $37.3 billion, with $16.6 billion in U.S. equity strategies,
$15.0 billion in non-U.S strategies, $2.4 billion in global
strategies, and $2.6 billion in hedged equity strategies. As
a percentage of the pension fund’s assets, the Public Equity
allocation was 42.5 percent on June 30, 2016.
The Public Equity portfolio maintains prudent diversification
within the broad equity market across size and valuation
style. Valuation style divides stocks into value, growth,
and core. Value stocks are characterized by low valuation
multiples such as price to book (P/B) and price to
earnings (P/E). Growth stocks typically have higher-than-average
sales and earnings growth prospects. Core is a
blend between value and growth. The portfolio is also
categorized into U.S. Large-Cap, U.S. Mid-Cap, U.S. Small-
Cap and Non-U.S. investments.
All investments of the Public Equity portfolio are managed
externally according to one of two different strategies:
passive or active. Passive investments track existing indexes
in relatively efficient markets. Actively managed portfolios
give the manager discretion to make investment decisions
within the parameters of the portfolio’s mandate with intent
to outperform the benchmark over time. The following
charts provide percentage of distribution between type,
style, and strategy.
PUBLIC EQUITY ACTIVE & PASSIVE
ALLOCATION
STRATEGY ALLOCATION
Cash /
Transition
1.5% Active
54.1%
PUBLIC EQUITY STYLE ALLOCATION
STYLE ALLOCATION
Cash /
Transition
1.5%
Hedge Funds
7.0%
Core
55.8%
Passive
44.4%
Growth
18.4%
Value
17.2%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 34
I N V E S T M E N T MANAGEMENT D I V I S I O N
Public Equity Performance
The graph below illustrates the fiscal year performance against the benchmark, as well as the three-, five-, 10- and 15-year
trailing returns.
PUBLIC EQUITY SIZE ALLOCATION
Emerging Int’l
4.4%
US Large Cap
37.4%
Developed Int’l
33.3%
Frontier
0.5%
Int’l Small Cap
2.4%
US Small Cap
3.5%
US Mid Cap
3.7%
Cash / Transition
1.5%
Equity Hedge
7.0%
Global
6.5%
Rebalance 0%
PUBLIC EQUITY INVESTMENT PORTFOLIO ANNUALIZED PERFORMANCE
Fiscal 2016 Tr. 3 Yr Tr. 5 Yr Tr. 10Yr Tr. 15 Yr
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-3.9% -3.8%
6.7%
6.1% 6.2%
5.4%
4.6% 4.1%
4.9%
4.2%
Public Equity Investment Portfolio Custom Equity Benchmark
North Carolina State Treasurer’s Annual Report • 2015-2016 | 35
I N V E S T M E N T MANAGEMENT D I V I S I O N
REAL ESTATE
As of June 30, 2016, the Core Real Estate Investment
Portfolio (“Core REIP”) was valued at $4.45 billion or 5.1%
allocation as a percentage of Pension Fund assets. The Non-
Core REIP was valued at $3.90 billion or 4.5% allocation
as a percentage of Pension Fund assets. These portfolios
consist of both open-end and closed-end commingled
funds as well as separate account mandates.
The Core REIP seeks returns from income and capital
appreciation by investing in core public equity and private
equity real estate. The Non-Core REIP invests in value-added
and opportunistic strategies. Core real estate is
represented by well-located, stable properties with high
occupancy levels. Core investment returns are primarily
driven by property income with debt levels typically
at 0-50 percent of property value. Value-added real
estate generally requires some additional leasing and
moderate tenant improvements before the properties are
sold. Returns are derived from both income and capital
appreciation with debt levels ranging from 50 percent to
65 percent of property value. Upon completion of value-added
strategies, assets become core and can be sold at
premium valuations. Opportunistic real estate investments
require significant capital expenditures. Returns are
derived from capital appreciation due to the lack of
“going-in” cash flows. Opportunistic strategies include
development, redevelopment, restructuring, land and
distressed properties. These investments have high debt
levels typically between 65 percent and 80 percent of
property value. The chart below outlines these allocations:
CORE REAL ESTATE STRATEGY
ALLOCATION
Private Equity
Core Real Estate
86%
Public Equity
Real Estate
14%
NON-CORE REAL ESTATE STRATEGY
ALLOCATION
Non Core RE
Value Added
37%
Non Core RE
Opportunistic
63%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 36
I N V E S T M E N T MANAGEMENT D I V I S I O N
In addition, the analysis of new investments focuses on location and property types. Both Core REIP and Non-Core REIP
invest in a variety of property types including debt, industrial, land, lodging, multi-type, office, multi-family residential,
single-family residential, retail and timber. The chart below displays the percentage of each property type allocation as of
June 30, 2016.
PROPERTY TYPE DIVERSIFICATION VS. BENCHMARKS
Office Residential Retail Industrial Hotel Other
Office Residential Retail Industrial Hotel Mixed Use Other
Total Real Estate Core NFI-ODCE
Total Real Estate Non-Core Courland Non-Core
North Carolina State Treasurer’s Annual Report • 2015-2016 | 37
40%
30%
20%
10%
0%
40%
35%
30%
25%
20%
15%
10%
0%
32.1
32.1
37.7
28.2
41.5
21.1
9.0
4.1
3.2
11.3
1.0
1.9
8.6
6.7
0.8
4.1 3.4
5.5
14.5
14.2
10.7
6.9
6.9
10.2
7.9
4.1
5.5
29.5
29.5
24.1
22.7
20.9
39.5
17.4
17.4
20.0
11.9
23.4
10.4
I N V E S T M E N T MANAGEMENT D I V I S I O N
Geographically, both Core REIP and Non-Core REIP have a U.S. focus, and is diversified among the South, East, West and
Midwest regions. Investment exposure outside of North America is approximately 16 percent, with the majority split between
Europe and Asia. The following chart shows both the US and global geographic allocations as of June 30, 2016.
GEOGRAPHIC DIVERSIFICATION
East West South Midwest Foreign
45
40
35
30
25
20
15
10
5
0
Total RE Core RE Non-Core RE
32.5
40.2
23.9
31.1
29.6
32.5
16.8
20.1
13.7
4.2
6.2
2.2
15.4
20.2
11.3
NCRS NON-CORE REAL ESTATE
FOREIGN INVESTMENTS
Latin America
$71m
8.9%
Europe
$489.9m
61.4%
NCRS CORE REAL ESTATE
FOREIGN INVESTMENTS
Asia
$143m
27.3%
Canada $14m
2.7%
Asia $206.7m
25.9%
Europe
$299.6m
57.2%
Australia
Pacific $32.2m
6.1%
GLOBAL GEOGRAPHIC DIVERSIFICATION
Australian
Pacific $20.9m
2.6%
Canada $5.7m
0.7%
Foreign Other $2.7m, 0.3%
Africa $0.5m, 0.1%
Foreign Other $20.6m
3.9%
Africa $7.9m, 1.5%
Latin America
$6.6m
1.3%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 38
I N V E S T M E N T MANAGEMENT D I V I S I O N
Real Estate Performance
For the fiscal year 2016, the Core REIP returned 8.5 percent, net of fees, underperforming its custom benchmark return
of 12.4 percent. Non-Core REIP returned 12.4 percent, net of fees, outperforming its custom benchmark return of 6.5%
The Core Real Estate Benchmark is comprised of 80% NCREIF ODCE Net and 20% FTSE EPRA NAREiT Global Index. The
Non-Core Real Estate Benchmark is comprised of the following Burgiss Group Private iQ indices: 80% U.S. Non-Core Real
Estate (Opportunistic and Value-Added) and 20% Non-U.S. Non-Core Real Estate (Opportunistic and Value-Added).
CORE REAL ESTATE INVESTMENT PORTFOLIO ANNUALIZED PERFORMANCE
15.0%
10.0%
5.0%
0.0%
Fiscal 2016 Tr. 3 Yr Tr. 5 Yr Tr. 10 Yr
Core Real Estate Investment Portfolio Custom Real Estate Benchmark
8.5
12.4%
8.6%
11.9%
9.2%
11.6%
4.6%
5.4%
NON-CORE REAL ESTATE INVESTMENT PORTFOLIO ANNUALIZED PERFORMANCE
30.0%
20.0%
10.0%
0.0%
Fiscal 2016 Tr. 3 Yr Tr. 5 Yr Tr. 10 Yr
Non-Core Real Estate Investment Portfolio Custom Real Estate Benchmark
12.4%
6.5%
15.7%
9.7%
13.6%
9.5%
3.8% 2.8%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 39
I N V E S T M E N T MANAGEMENT D I V I S I O N
PRIVATE EQUITY
As of June 30, 2016, the Private Equity investment portfolio
maintained a market value of approximately $4.4 billion,
representing 5.0 percent of the pension fund. The portfolio
invests in limited partnerships and other limited liability
entities, which are externally managed by experienced
private equity investment professionals. The Private Equity
investment portfolio has three major subcomponents:
Growth, Buyout, and Special Situations. Growth includes
venture capital and growth equity strategies. Growth
equity investments, most often minority investments, are
in relatively mature companies that are looking for capital
to expand or restructure operations, enter new markets or
finance a major acquisition without a change of control of
the business. Venture capital refers to equity investments
made, typically in less mature companies, for the launch
of a seed or start-up company, early stage development,
or expansion of a less mature business. Buyout refers
to a strategy of making control investments as part of a
transaction in which a company, business unit, or business
assets are acquired from the current owners typically with
the use of financial leverage. Special Situations includes
a broad set of strategies such as distressed for control,
secondary strategies, co-investment, and other strategies
not classified into buyout or growth.
The Private Equity portfolio’s allocation to these
subcomponents is displayed below.
PRIVATE EQUITY STRATEGY ALLOCATION
(BASED ON COMMITMENTS)
Special
Situations
13.4%
Growth
21.2%
Buyout
41.7%
Fund of Funds
23.2%
Stock Distribution
0.5%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 40
I N V E S T M E N T MANAGEMENT D I V I S I O N
PRIVATE EQUITY INVESTMENT PORTFOLIO ANNUALIZED PERFORMANCE
Fiscal 2016 Tr. 3 Yr Tr. 5 Yr Tr. 10Yr Tr. 15 Yr
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
4.3% 4.3%
10.6%
9.7%
8.8%
9.3%
7.2%
9.2%
4.2%
9.3%
Private Equity Investment Portfolio Private Equity Custom Benchmark
Private Equity Performance
For the fiscal year, the Private Equity investment portfolio returned 4.32 percent, underperforming its benchmark return of
4.33 percent.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 41
I N V E S T M E N T MANAGEMENT D I V I S I O N
OPPORTUNISTIC FIXED INCOME PORTFOLIO
As of June 30, 2016, the Opportunistic Fixed Income
portfolio maintained a market value of approximately $5.3
billion, representing 6.0 percent of the Pension Fund. The
portfolio has a target weight of 7.0 percent and invests
in a diversified mix of credit-focused investment vehicles
managed by experienced investment advisors. The
vehicles include hedge funds, capital drawn down, and
hybrid vehicles. The Opportunistic Fixed Income Strategies
investment portfolio has four major subcomponents:
Traditional Corporate Credit, Distressed Debt, Hedged
Fixed Income, and Special Situations. Traditional Corporate
Credit are strategies that invest in high yield bonds and bank
loans. Distressed Debt are predominantly strategies that
trade distressed debt, but occasionally actively participate
in restructurings and seek control post-reorganization of
target issuers. Hedged Fixed Income includes hedged
implementations of market neutral strategies, relative value
strategies, and multi-strategy (i.e., predominantly fixed
income) utilizing non-investment grade instruments. Special
Situations includes mezzanine, direct lending, and structured
credit. The latter can include mortgage- and other asset-backed
securities and financings.
STRATEGY ALLOCATION
Distressed Credit
14.3%
Special Situations
20.5%
Trad Corp Credit
8.5%
Hedged
Fixed Income
56.8%
Opportunistic Fixed Income Portfolio Performance
For the fiscal year, the Opportunistic Fixed Income Portfolio returned -4.4 percent, underperforming its benchmark return of
-3.6 percent..
North Carolina State Treasurer’s Annual Report • 2015-2016 | 42
I N V E S T M E N T MANAGEMENT D I V I S I O N
OPPORTUNISTIC FIXED INCOME STRATEGIES ANNUALIZED PERFORMANCE
Fiscal 2016 Tr. 3 Yr 	 Tr. 5 Yr Tr. 10 Yr
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-4.4%
2.4%
0.4%
4.8%
5.8%
Opportunistic Fixed Income Strategies Opportunistic Fixed Income Custom Benchmark
-3.6%
0.5% 0.2%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 43
I N V E S T M E N T MANAGEMENT D I V I S I O N
INFLATION SENSITIVE PORTFOLIO
As of June 30, 2016, the Inflation Sensitive Protection
Portfolio maintained a market value of $5.2 billion,
representing 5.9 percent of the Pension Fund. The
portfolio invests in a diversified mix of inflation sensitive-linked
investment vehicles managed by experienced
investment advisors. The portfolio is divided into three
subcomponents: Publicly Trade Natural Resources, Private
Natural Resources, and Real Assets and Other Diversifiers.
Publicly Traded Natural Resources are strategies that invest
in commodity and natural resource public equity and public
debt using long-only or hedged implementations. Private
Natural Resources are strategies making non-public market
equity or debt investments in energy, agriculture, and other
natural resources implementations. Real Assets and Other
Diversifiers are strategies including infrastructure, real
assets (e.g., ships, airplanes, rail cars, mines, real estate,
etc.), royalties, and combinations of any of this and the
other subcomponents whose primary purpose is providing
protection against risks associated with Inflation Sensitive.
Inflation Sensitive Protection Performance
For the fiscal year, the Inflation Sensitive Protection Portfolio returned -5.75 percent, underperforming its benchmark return
of -3.13 percent.
STRATEGY ALLOCATION
Real Assets
& Other Diversifiers
40.8%
Private Natural Resources
32.1%
Public Natural
Resources
17.3%
TIPS
9.7%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 44
I N V E S T M E N T MANAGEMENT D I V I S I O N
INFLATION INVESTMENT PORTFOLIO ANNUALIZED PERFORMANCE
Fiscal 2016 Tr. 3 Yr Tr. 5 Yr Tr. 10 Yr
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-5.8%
-3.1%
Inflation Investment Portfolio Inflation Custom Benchmark
-2.7%
-1.7%
-3.6% -3.1%
-1.0%
2.1%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 45
I N V E S T M E N T MANAGEMENT D I V I S I O N
MULTI-STRATEGY INVESTMENT PORTFOLIO ANNUALIZED PERFORMANCE
Fiscal 2016 Tr. 3 Yr Tr. 5 Yr Tr. 10 Yr
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-1.5%
-3.4%
Multi-Strategy Investment Portfolio Multi-Strategy Custom Benchmark
5.9%
4.7%
8.5%
6.6%
5.0%
5.7%
MULTI-STRATEGY PORTFOLIO
As of June 30, 2016, the Multi-Strategy Portfolio maintained
a market value of $1.6 billion, representing 1.8 percent of
the Pension Fund. The Multi-Strategy Portfolio invests in
externally managed vehicles that have the flexibility to
invest across markets, asset classes, commodities, and
currencies, including hedging. Strategies may include
opportunistic, event-driven, and relative value multi-strategy,
global macro, rebalancing, tail hedging and
overlays.
Multi-Strategy Performance
For the fiscal year, the Multi-Strategy Portfolio returned
-1.5 percent, outperforming its benchmark return of -3.4
percent.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 46
I N V E S T M E N T MANAGEMENT D I V I S I O N
ANCILLARY GOVERNMENTAL PARTICIPANT
INVESTMENT PROGRAM REVIEW
The Treasurer is responsible for one or more investment
programs for the deposit and investment of assets pursuant
to the provision of N.C.G.S. 147-69.1 and N.C.G.S. 147-69.2,
the AGPIP’s objective is to generate returns that match or
exceed those of the appropriate benchmarks over a three-to
five-year basis for the Escheats Fund, Public Hospital
Funds, the Local Government Other Post-Employment
Benefits Program, and other ancillary governmental
participants’ assets.
ESCHEATS FUND
Pursuant to G.S. 147-69.2(b)(12), up to 20 percent of the
Escheats Investment Fund’s assets can be invested in the
authorized Public Equity, Real Estate and Private Equity
asset classes discussed above. For the fiscal year ending
June 30, 2016, the Escheats Fund maintained a total
portfolio market value of $533.0 million, with $500.6
million invested in fixed income, and $32.4 million invested
in private equity. The following table and chart provide
the Escheats Fund’s asset allocation and each allocation’s
percentage of the total Escheats Fund as of June 30, 2016.
Actual allocations versus target weights reflect the relatively
large appropriations out of the fund in recent years. The
policy is expected to be revisited in the upcoming fiscal year.
ESCHEAT INVESTMENT FUND ASSET ALLOCATION AS OF JUNE 30, 2016
Market Value (000's) Portfolio Weight
Fixed Income $500,601 93.9%
Private Equity $32,428 6.1%
Escheat Fund $533,029 100%
ESCHEATS INVESTMENT FUND ASSET ALLOCATION
Private Equity
6.1%
Short Term Fixed
71.2%
Long Term Fixed
22.7%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 47
I N V E S T M E N T MANAGEMENT D I V I S I O N
PUBLIC HOSPITALS
Pursuant to G.S. 147-69.2(b2), North Carolina public hospitals
are allowed to invest assets in the authorized public equity
funds, STIF, and LTIP. As of June 30, 2016 the assets were
invested based on the hospital’s chosen allocation.
As of June 30, 2016, the market value for the New Hanover
Hospital portfolio was $174.8 million, the market value for
Columbus Regional Healthcare System was $13.8 million, the
market value for the Margaret R. Pardee Hospital was $8.4
million, and the market value for the Watauga Medical Center
was $31.8 million.
OTHER POST-EMPLOYMENT BENEFITS FUND
Pursuant to G.S. 159-30.1(b), the assets of Other Post-
Employment Benefits (“OPEB”) Trusts can be deposited
with the State Treasurer for investment according to G.S.
147-69.2(b4). The assets are allocated among: STIF, LTIP and
authorized public equity funds. As of June 30, 2016, there
were a total of 16 participants with assets totaling $201.8
million in allocations based on the OPEB’s Trust’s chosen
allocation.
BOND PROCEEDS FUND
The assets of the Bond Proceeds Fund, managed by Sterling
Capital, totaled $191.1 million as of June 30, 2016.
CONSERVATION EASEMENT ENDOWMENT FUND
The assets of the Conservation Easement Endowment Fund
invested in the LTIP and authorized public equity fund,
totaled $2.8 million as of June 30, 2016.
OTHER ANCILLARY GOVERNMENTAL
PARTICIPANTS
As of June 30, 2016, the aggregate market value of the
other ancillary governmental participants invested in the
Long-Term Investment Portfolio was $1.56 billion.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 48
STATE & LOCAL GOVERNMENT
FINANCE DIVISION
49 North Carolina State Treasurer’s Annual Report • 2015-2016
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
STATE & LOCAL GOVERNMENT FINANCE DIVISION
2013-14 2014-15 2015-16
Maintained the AAA Bond Rating Yes Yes Yes
Number of Local Government Units Contacted
Regarding their Fiscal Health or Compliance with
General Statutes
333 528 267
Total Debt Issued by Local Governments $1.9 Billion $4.2 Billion $4.4 Billion
Debt Issued for Special State and Local Authorities
and Agencies $1.2 Billion $2.2 Billion $2.6 Billion
Total State Debt Issued $0.3 Billion $0.8 Billion $0.5 Billion
North Carolina State Treasurer’s Annual Report • 2015-2016 | 50
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
The State and Local Government Finance Division handles the sale and delivery of all State and local debt and
monitors the repayment of State and local government debt. Staff counsel assists local governments in determining
the feasibility of projects, the size of the financing, and the most expedient form of financing. Additionally, this
Division monitors and analyzes the fiscal and accounting practices of all local governments.
The Division comprises the Debt Management section, which issues and monitors all State and local debt, and the Fiscal
Management section, which monitors fiscal and accounting standards for local governments. The Division also provides
the State Treasurer, the Local Government Commission, the North Carolina Capital Facilities Finance Agency, and the North
Carolina Infrastructure Finance Corporation with staff assistance in fulfilling their respective statutory functions.
2015-16 FISCAL YEAR SUMMARY OF DEBT ISSUED
Total State $ 0.3 Billion
Total Local Governments $ 4.4 Billion
TOTAL $ 4.7 Billion
HISTORY
In 1931 the North Carolina General Assembly established
the Local Government Commission (“LGC”), staffed by this
Division, to help address the problems in local government
finance caused by the Depression. In 1933, 62 North Carolina
counties, 152 cities and towns, and some 200 special districts
were in default on the principal or the interest or both of
outstanding obligations. The debt of its local governments in
general finds a significantly better reception on the national
bond markets than the national average. Many attribute this
favored credit status, in part, to the work of the LGC. This
Commission is unique nationally and is often referred to as a
model for local government financial oversight.
THE LOCAL GOVERNMENT COMMISSION
The LGC, established by G.S. 159-3, provides assistance
to local governments and public authorities in North
Carolina. It is staffed by the Department of State Treasurer
and approves the issuance of debt for all units of local
government and assists these units with fiscal management.
The Commission is composed of nine members: the State
Treasurer, the Secretary of State, the State Auditor, the
Secretary of Revenue, and five others by appointment (three
by the Governor, one by the General Assembly upon the
recommendation of the President Pro Tempore, and one
by the General Assembly upon the recommendation of the
Speaker of the House of Representatives). The State Treasurer
serves as Chair and selects the Secretary of the Commission,
who heads the administrative staff serving the Commission.
The General Statutes require the Commission to meet at least
quarterly. As a matter of practice, the Commission meets on
the even months, and the Commission’s executive committee
meets in the odd months.
THE NORTH CAROLINA CAPITAL FACILITIES
FINANCE AGENCY
Private colleges, universities, nonprofit and for-profit
corporations providing certain services may receive
financing assistance through bonds issued by the North
Carolina Capital Facilities Finance Agency (“Agency”),
established by the General Assembly in 1986. The Agency
Board of Directors is composed of seven members: the
State Treasurer, the State Auditor, and five others by
appointment (three by the Governor, one by the President
Pro Tempore of the Senate and one by the Speaker of the
House of Representatives). The administrative staff for the
Agency is provided by the Department of State Treasurer.
The Agency meets monthly.
Following initial contact from an applicant, the staff
generally begins the process of determining project
feasibility and desirability with a preliminary conference.
Upon receipt of an application, financial capability and
responsibility is reviewed through ratio and trend analysis.
The staff presents the project and its recommendations
to the Agency board and subsequently to the LGC for
approval. Since its creation, the Agency has provided over
$7.96 billion in tax-exempt capital financing. At June 30,
2016, there were $2.79 billion in outstanding obligations.
Each issue is payable solely from revenues derived from
each entity financed, is separately secured, and is separate
and independent from all other series of bonds as to source
of payment and security. During the fiscal year ended June
30, 2016, the Agency issued $860 million in bonds for
eleven institutions. The Agency’s annual report is available
from the Department of the State Treasurer.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 51
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
THE NORTH CAROLINA INFRASTRUCTURE
FINANCE CORPORATION
The North Carolina Infrastructure Finance Corporation
(“Corporation”) was created by the General Assembly and
organized as a separate not-for-profit corporation. It is
managed by a three-member board appointed by the State
Treasurer. The Corporation is authorized to issue tax-exempt
debt to finance the acquisition, construction, repair and
renovation of State facilities and related infrastructure. The
debt obligations are secured by lease or payment agreements
with the State, with the State financially responsible for the
debt payments. The administrative staff for the Corporation
is also provided by the Department of State Treasurer. The
Corporation has been inactive since 2007.
DEBT MANAGEMENT
The Division issues and monitors all State debt, including
debt secured by a pledge of the taxing power of the State and
debt for which repayment is subject to appropriation. With the
assistance of other State agencies, the Division determines
the cash needs, plans for the repayment of debt (maturity
schedules) and schedules the sale at the most appropriate
time. An official statement describing the issue and other
required disclosures about the State is prepared with the
advice and cooperation of bond counsel. Finally, the Division
handles the actual sale and delivery of the debt, maintains
the State bond records and register of bonds, and monitors
the debt service payments. At June 30, 2016, the State had
General Obligation bonds outstanding of approximately
$3.0 billion and certificates of participation, limited
obligation bonds and lease-purchase bonds outstanding of
approximately $2.1 billion. (See Tables 7 and 8.)
The Division also is responsible for the authorization and
sale of revenue bonds for the North Carolina Medical
Care Commission, the Municipal Power Agencies, the
North Carolina Capital Facilities Finance Agency and the
North Carolina Housing Finance Agency. Only the specific
revenues pledged for payment secure these bonds.
The staff works with the personnel of these agencies in
determining the feasibility and scheduling of the bond
offerings, in structuring the issues and the underlying
security documents, and in preparing the data that must be
presented to the LGC for its approval.
The Division assists the State Treasurer in representing the
State in all presentations to Moody’s Investors Service,
Inc., Standard & Poor’s Corporation and Fitch Ratings, Inc.,
the three national bond rating agencies used by the State
and local governmental units in North Carolina. At June
30, 2016, the State had a “Triple-A” rating, the highest
rating attainable, from all three national rating agencies.
Only eleven other states enjoyed this distinction. These
ratings have enabled the State to sell its bonds at interest
rates considerably below the Bond Buyer’s Index, thereby
providing tremendous savings to North Carolina’s taxpayers.
In addition, the Division staffs the State’s Debt Affordability
Committee and drafts an annual Debt Affordability Study,
which provides the General Assembly with an overview of
the State’s debt load and borrowing capacity. The February
1, 2016 Study determined that the State’s annual General
Fund debt capacity was approximately $209 million in
fiscal year 2016. The Study also provided an estimate of the
annual debt capacity for the transportation funds (the State
Highway Fund and Highway Trust Fund) and projected that
there is approximately $240 million of new transportation
debt capacity.
The other primary function of the Division is the approval,
sale and delivery of all North Carolina local government
bonds and notes. This includes the sale of revenue bonds,
which are secured only by specific revenue pledged
in payment of the bonds. The Division staff counsels
and assists local governmental units in determining the
necessity of a project, the size of the issue, and the most
expedient form of financing. A review is made of the debt
management policies of the unit, the effect of the financing
on the unit’s tax rate and the unit’s compliance with the
Local Government Budget and Fiscal Control Act. Sale dates
are scheduled depending on the need for the money, the
anticipated interest rates and the most favorable times
bonds can be sold with a minimum of competition. The
staff strives to resolve all problems and to determine that
all statutory requirements are met before applications are
presented to the LGC for approval.
Debt records are maintained for all units on principal and
interest payments coming due in the current and future
years. All debt service payments are monitored through a
system of monthly reports. At June 30, 2016, authorized and
unissued general obligation bonds for local governments and
authorities amounted to $6.2 billion and general obligation
debt outstanding amounted to $8.9 billion. (See Table 7.)
Another responsibility of the Division’s staff is assisting units
that desire to enter into agreements to finance the lease or
installment purchase of capital assets. Before approving such
agreements, the LGC must find that the proposed project
is necessary and expedient, the proposed undertaking
cannot be economically financed by a bond issue and
that the contract will not require an excessive increase
in taxes. During the fiscal year ended June 30, 2016, the
LGC approved contracts or other agreements (including
refundings) totaling $1.5 billion. (See Tables 5 and 6.)
North Carolina State Treasurer’s Annual Report • 2015-2016 | 52
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
Staff continues to perform several tasks to ensure
compliance with various, Internal Revenue Service,
Securities and Exchange Commission and other
requirements relating to the ongoing management of
tax exempt debt, which includes monitoring, arbitrage
rebate compliance, preparing and filing secondary market
disclosures information and other post issuance compliance
duties. Staff also prepares information for use by the
General Assembly, bond counsel and other outside finance
and legal professionals.
1 The GARVEES are bonds issued for the State Department of Transportation for transportation construction and improvement costs. They are payable solely
from certain federal transportation revenues received on behalf of the State and do not create a liability or obligation of the State or any political subdivision.
The State issued no new GARVEE bonds in fiscal year 2016.
2 These These are ongoing programs involving more than a year in duration. The purpose of these projects is to allow interim funding of large ongoing
programs until a sufficient amount of bonds or favorable market conditions justify replacing the notes with permanent financing.
3 Bonds issued by these authorities are commonly referred to as Industrial Revenue Bonds and are used to attract and retain manufacturing industries to the State.
BOND ISSUANCES FOR 2015-16
FY No. 2015-2016 (Amount in Millions)
BONDS SOLD FOR THE STATE
G.O. Bonds (General Fund) 1 $ 329.4
North Carolina Turnpike Authority Revenue Bonds - -
Grant Anticipation Revenue Vehicle Bonds 1 - -
Special Indebtedness - -
Total Issued 1 $ 329.4
BONDS AND NOTES SOLD FOR LOCAL GOVERNMENT UNITS
G.O. Bonds 50 $ 934.8
Revenue Bonds 57 1,963.9
Water and Sewer Revolving Loans 42 72.5
Water and Sewer Loans (Stimulus) 0 0.0
Special Obligation Bonds - Solid Waste 6 59.6
G.O. Notes2 31 176.4
Revenue Notes2 13 53.9
Total Issued 218 $ 3,188.6
Installment/Lease Contracts Sold for Local Units 126 $1,169.1
Total for Local Government 325 $ 4,430.2
REVENUE BONDS SOLD FOR
Medical Care Commission 16 683.6
Housing Finance Agency 1 66.0
Power Agencies 7 970.9
Industrial Facilities & Pollution Control Financing Authorities3 2 10.5
NC Department of Transportation (I-77) 0 0.0
Capital Facilities Finance Agency 11 860.4
Total Issued 37 $2,591.4
GRAND TOTAL ISSUED 363 $ 7,351.0
-- TABLE 3 --
North Carolina State Treasurer’s Annual Report • 2015-2016 | 53
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
A comparison of bond issuances by the categories above
in fiscal year 2015-16 with issuances in the past two fiscal
years is shown below in Chart 8.
FISCAL MANAGEMENT
Another function of the Division involves monitoring
certain fiscal and accounting standards prescribed for
local governmental units by the Local Government Budget
and Fiscal Control Act. The Act requires each unit of local
government to have its accounts audited annually by a
Certified Public Accountant or by an accountant certified
by the Commission as qualified to audit local government
accounts. As a part of its role in assisting local units and
monitoring their fiscal programs, the Division provides
guidance in following generally accepted accounting
principles. Each local government is required to file a copy
of its annual audit report with the Division and submit all
audit invoices to the Division for approval.
The staff of the Fiscal Management Section annually reviews
the audited financial statements of approximately 1,331 local
governments and public authorities. The staff determines
that all reports are prepared in accordance with generally
accepted accounting principles and that applicable
auditing standards have been followed. The staff also
reviews the audit report to evaluate the financial condition
of the unit, to determine if the unit complied with the Local
Government Budget and Fiscal Control Act and other State
laws, and to determine if the unit has an adequate system
of internal controls in place. As a part of the audit review
process, staff reviewed approximately 612 single audits
and approximately 262 “Yellow Book” audits to ensure that
audits performed under Government Auditing Standards
(the “Yellow Book”) and the federal and State single audit
acts meet all the federal and State requirements.
When Division staff notes problems, local governments and
public authorities, as well as their independent auditors,
receive written communication expressing the staff’s
concerns, suggestions for improvements and an offer of
assistance. On behalf of the LGC, staff requests a response
detailing the unit’s plans to take corrective action. In fiscal
year 2015-16, staff sent approximately 267 audit letters to
units of local government. Letters typically discussed such
issues as over expenditures in the budget, fiscal weaknesses
in the water and sewer system, internal control problems
with the accounting system, credit cards or deposits, late
delivery of audits or problems with the unit’s level of fund
balance. In providing assistance to local governments, units
are counseled in accounting systems and internal controls,
cash and investment management, budget preparation, risk
management, capital planning and changes in laws and
regulations. Educational programs in the form of seminars
and classes are also provided in order to accomplish these
tasks. Staff members make presentations throughout the
year at various workshops sponsored by:
• North Carolina Association of School Business Officers
• North Carolina Government Finance Officers Association
• North Carolina Local Government Investment Association
• North Carolina League of Municipalities
• North Carolina State University MPA Program
• North Carolina Department of Justice
• UNC School of Government
• Large City and County Finance Officers Association
• Treasurer’s Conference on Innovation and Sustainability
• Cherry, Bekaert, LLP
OUTREACH AND COMMUNICATION
• Staff members spoke at 14 continuing education courses
and conferences sponsored by organizations such as the
UNC School of Government, various North Carolina finance
officers associations, the North Carolina Association of
Certified Public Accountants, and N.C. State University.
Due to scheduling conflicts, the staff decided to move the
15th annual State Treasurer’s Conference on Accounting,
Auditing and Financial Reporting to Fall, 2016.
• A Continuing Professional Education class for
governmental auditors was offered again in 2016 in
collaboration with the UNC School of Government. Held at
the UNC campus, the class covered information from DHHS
on compliance issues, a compliance auditing update, the
municipal Powell Bill program, auditing local government
investments, unit letters, the preaudit process, and new
GASB standards. It was well received with 112 attendees.
• A member of the staff serves on the Governmental
Accounting and Auditing Committee of the NCACPA. Staff
members provide additional assistance to independent
auditors by researching their questions concerning govern-mental
accounting, auditing and budgeting, as well as
North Carolina General Statutes.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 54
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
OTHER HIGHLIGHTS
Implementation of GASB Statement 68
Local government participants in the Teachers and State
Employees Retirement System and the Local Government
Employees Retirement System implemented GASB
Statement number 68 as of June 30, 2015. Fiscal staff
continued updating its dedicated website that provided
myriad templates, memoranda, and illustrative documents
for the various reporting components required for
successful implementation. Staff also maintained a regularly
updated FAQ as well as provided individual assistance
for local government and independent auditors’ staffs.
We continued to refine our guidance and developed a
journal entry template tool for units to use as of June 30,
2016 for their second year of implementation. Staff also
began working on the implementation process for GASB
Statements 73, 74, and 75, which are refinements of GASB
68 and new reporting standards for units that offer retire
healthcare and other post-employment benefits.
COACH Team
In the 2015-2016 operating budget, the General Assembly
allocated funds to Fiscal Management for the development
and implementation of a two person COACH team to assist
troubled local governments. Staff was hired in May and
June of 2016 to provide hands-on, onsite training and
development for local entities that are struggling. The team
began working with units in July, 2016.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 55
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
-- TABLE 4 --
GENERAL OBLIGATION BONDS | LOCAL GOVERNMENT | REFERENDA & AUTHORIZATIONS
FISCAL YEAR JULY 1, 2015 - JUNE 30, 2016
Propositions Bonds
# Proposed # Approved % Approved $ Proposed $ Approved % Approved
COUNTIES
VOTED PROPOSITIONS
School
Community College
Parks & Recreation
Total 0 0 0% $0 $0 0%
NONVOTED PROPOSITIONS
Refunding 11 11 100.00% 410,835,000 410,835,000 100.00%
2/3rds
Total 11 11 100.00% $410,835,000 $410,835,000 100.00%
DISTRICTS
VOTED PROPOSITIONS
Water
Sewer
Total 0 0 0% $0 $0 100.00%
NONVOTED PROPOSITIONS
Refunding 9 9 100.00% 33,665,000 33,665,000 100.00%
Total 9 9 100.00% $33,665,000 $33,665,000 100.00%
MUNICIPALITIES
VOTED PROPOSITIONS
Water 1 1 100.00% 3,000,000 3,000,000 100.00%
Sewer 1 1 100.00% 2,000,000 2,000,000 100.00%
Greenway 1 1 100.00% 5,000,000 5,000,000 100.00%
Parks & Recreation 2 2 100.00% 43,000,000 43,000,000 100.00%
Solid Waste 1 1 100.00% 5,200,000 5,200,000 100.00%
Storm Water 1 1 100.00% 5,900,000 5,900,000 100.00%
Transportation 1 1 100.00% 21,000,000 21,000,000 100.00%
Telecommunications 1 1 100.00% 10,000,000 10,000,000 100.00%
Streets & Sidewalks 3 3 100.00% 47,050,000 47,050,000 100.00%
Total 12 12 100.00% $142,150,000 $142,150,000 100.00%
NONVOTED PROPOSITIONS
Refunding 10 10 100.00% 248,570,000 248,570,000 100.00%
2/3rds 2 2 100.00% 6,815,000 6,815,000 100.00%
Total 12 12 100.00% $255,385,000 $255,385,000 100.00%
TOTAL VOTED 12 12 100.00% $142,150,000 $142,150,000 100.00%
TOTAL NONVOTED 32 32 100.00% $699,885,000 $699,885,000 100.00%
GRAND TOTALS 44 44 100.00% $842,035,000 $842,035,000 100.00%
North Carolina State Treasurer’s Annual Report • 2015-2016 | 56
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
MUNICIPALITIES: Amount
UTILITIES
Sanitary Sewer $6,510,625
Electric $4,806,000
Gas -
Water $11,606,653
$22,923,278
PUBLIC BUILDINGS
Fire Station $5,088,000
Municipal Buildings $147,635,134
Town Hall $350,000
Stadium & Auditorium $111,926,037
Community Center $933,452
$265,932,623
Land $1,810,683
Recreation $71,374,002
Streets & Sidewalks $30,331,393
Equipment $10,411,667
Refunding $153,054,504
Stormwater $714,464
Economic Development $1,500,000
Parking $5,800,000
Redevelopment $7,410,784
Vehicles $27,000
Housing $2,139,900
Flood & Erosion $790,527
Funding $1,179.646
Senior Center 830,908
$287,375,478
SUBTOTAL $576,231,379
-- TABLE 5 --
INSTALLMENT PURCHASE AGREEMENTS APPROVED BY PURPOSE
FISCAL YEAR JULY 1, 2015 THROUGH JUNE 30, 2016
COUNTIES: Amount
SCHOOLS $324,671,289
PUBLIC BUILDINGS
Recreation Center $1,623,385
Auditorium $32,764
Courthouse/Law Enforcement/Jail $21,634,472
County Buildings $99,140,267
Library $96,000
$122,526,888
UTILITIES
Water $13,000,000
Sanitary Sewer $216,117
$13,216,117
Community College $12,432,000
Refunding $392,117,499
Equipment $1,679,377
Vehicles $1,102,297
Land Acquisition $4,910,375
Solid Waste $238,544
Parking $40,080
Flood Erosion $35,331,979
Animal Shelter $1,703,000
Economic Development $9,400,000
$458,955,151
COMMUNITY COLLEGES
Guaranteed Energy Savings Contract/
Qualified School Construction $16,808,785
DISTRICTS/AUTHORITIES:
Water $1,659,940
Airport $1,300,000
Hospital Facility $1,500,000
$4,459,940
SUBTOTAL $940,638,170
GRAND TOTAL $1,516,869,549
North Carolina State Treasurer’s Annual Report • 2015-2016 | 57
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
-- TABLE 6 --
INSTALLMENT AND LEASE AGREEMENTS APPROVED BY THE LOCAL GOVERNMENT COMMISSION
FISCAL YEARS ENDED JUNE 30, 2016, 2015 AND 2014 (IN MILLIONS)
FY 2015-16 FY 2014-15 FY 2013-14
NO. Amount NO. Amount NO. Amount
Counties 35 $527,252 22 $350.0 17 $303.0
Municipalities 69 423,177 67 407.2 49 301.7
Authorities/Districts 4 4,459.9 1 0.8 4 12.0
Community College/GESC/QSCB 4 16,809 9 20.0 3 11.0
Subtotal 112 $971,697.4 99 $778.0 73 $627.7
Refunding 16 $545,172 31 $1,001.0 17 $326.3
GRAND TOTAL 128 $1,516,869.5 130 $1,779.0 * 90 $954.0*
*Total includes refundings.
-- TABLE 7 --
SUMMARY OF STATE AND LOCAL GOVERNMENT DEBT AND AUTHORIZATIONS
AT JUNE 30, 2016
General
Obligation
Debt
Special
Indebtedness/
Installment/
Lease
Purchase
Debt
Revenue
Bond/
Revolving &
State Bond
Loan/Special
Obligation
Bond Debt
Total
Industrial
Revenue
Bonds
Total
Indebtedness
General
Obligation
Bonds
Authorized
and Unissued
Non-
General
Obligation
Debt
Authorized
and
Unissued
State of NC $3,038,665,000 $2,121,890,000 $- $5,160,555,000 $- $5,160,555,000 $2,000,000,000 $-
GARVEE 1 - - 675,290,000 675,290,000 - 675,290,000 - -
NC Turnpike - - 1,011,388,109 1,011,388,109 - 1,011,388,109 - -
State
Authorities
& Institutions
- - 18,232,813,147 18,232,813,147 - 18,232,813,147 - -
Totals $3,038,665,000 $2,121,890,000 $19,919,491,256 $25,080,046,256 $- $25,080,046,256 $2,000,000,000 $-
Counties $6,391,485,242 $4,871,917,691 $834,880,177 $12,098,283,110 $- $12,098,283,110 $2,014,470,000 $-
Municipalities 2,212,277,327 3,129,949,654 5,889,108,087 11,231,335,068 - 11,231,335,068 1,368,691,825 -
Districts 318,436,606 15,398,619 1,568,312,448 1,902,147,673 - 1,902,147,673 - 117,737,000
Authorities - 8,718,663 1,985,557,387 1,994,276,050 1,261,514,147 3,255,790,197 - -
Total $8,922,199,175 $8,025,984,627 $10,277,858,099 $27,226,041,901 $1,261,514,147 $28,487,556,048 $3,383,161,825 $117,737,000
GRAND
TOTAL $11,960,864,175 $10,147,874,627 $30,197,349,355 $52,306,088,157 $1,261,514,147 $53,567,602,304 $5,383,161,825 $117,737,000
Note: Outstanding indebtedness above does not include the bonded indebtedness for which funds have been escrowed from advance
refunding proceeds or other sources to cover the debt.
	
1 Grant Anticipation Revenue Vehicle Bonds.
	
	
North Carolina State Treasurer’s Annual Report • 2015-2016 | 58
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
-- TABLE 8 --
Source: Chief fiscal officer of each authority or institution.
*unaudited.
REVENUE BONDS AND OTHER INDEBTEDNESS OF STATE
AUTHORITIES AND INSTITUTIONS AT JUNE 30, 2016
Appalachian State University $ 243,204,064
East Carolina University 359,454,053
Elizabeth City State University 33,218,851
Fayetteville State University 65,866,706
North Carolina A & T State University 110,274,932
North Carolina Central University 85,521,062
North Carolina School of the Arts 6,973,807
North Carolina State University at Raleigh 573,907,697
University of North Carolina at Asheville 44,629,318
University of North Carolina at Chapel Hill 1,370,851,448
University of North Carolina at Charlotte 526,193,862
University of North Carolina at Greensboro 310,369,677
University of North Carolina at Pembroke 51,557,625
University of North Carolina at Wilmington 218,753,911
Western Carolina University 125,440,120
Winston-Salem State University 88,277,347
North Carolina Capital Facilities Finance Agency 2,789,572,817
North Carolina Eastern Municipal Power Agency 421,430,000
North Carolina Housing Finance Agency 637,190,000
North Carolina Medical Care Commission 7,096,463,507
North Carolina Municipal Power Agency No. 1 1,135,360,000
North Carolina State Education Assistance Authority 1,749,696,647
North Carolina State Ports Authority 88,605,696
North Carolina Department of Transportation (I-77) 100,000,000
TOTAL $ 18,232,813,147
The following chart outlines the revenue bonds and other indebtedness of State authorities and institutions at June 30, 2016.
The State is not responsible for debt service on any of the revenue bonds and other indebtedness represented in this chart.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 59
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
PURPOSES FOR WHICH LOCAL GOVERNMENTS SOLD BONDS & NOTES
FISCAL YEAR 2016
School Utilities Refunding Other NO. Total Amount
G.O. BONDS
Counties $183,507,141 $- $387,787,000 $61,947,859 22 $633,242,000
Municipalities - 2,581,000 199,792,000 70,900,000 19 273,273,000
Districts and Authorities - - 28,290,000 - 9 28,290,000
Total G.O. Bonds $183,507,141 $2,581,000 $615,869,000 $132,847,859 50 $934,805,000
REVENUE BONDS
Counties - $36,186,713 $- $- 5 $36,186,713
Municipalities - 285,005,000 900,285,000 - 22 1,185,290,000
Districts and Authorities - 20,287,000 206,370,000 515,778,753 30 742,435,753
Total Revenue Bonds - $341,478,713 $1,106,655,000 $515,778,753 57 $1,963,912,466
SPECIAL OBLIGATION BONDS
Special Obligation Bonds - $48,613,691 - $11,000,000 6 $59,613,691
Total Special Obligation Bonds - $48,613,691 - $11,000,000 6 $59,613,691
WATER & SEWER REVOLVING LOANS
Counties - $3,572,031 - - 4 $3,572,031
Municipalities - 43,037,560 - - 29 43,037,560
Districts and Authorities - 25,938,596 - - 9 25,938,596
Total Water & Sewer Revolving Loans - $72,548,187 - - 42 $72,548,187
NOTES
G.O. Bond Anticipation Notes $9,479,595 $11,328,000 - $155,603,500 31 $176,411,095
Revenue Notes - 31,090,701 - 22,804,360 13 53,895,061
Total $9,479,595 $42,418,701 - $178,407,860 44 $230,306,156
TOTAL BONDS & NOTES $192,986,736 $507,640,292 $1,722,524,000 $838,034,472 199 $3,261,185,500
-- TABLE 9 --
North Carolina State Treasurer’s Annual Report • 2015-2016 | 60
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
DEBT MANAGEMENT ACTIVITIES - STATE & LOCAL (IN MILLIONS)
FY 2015-16 FY 2014-15 FY 2013-14
NO. Amount NO. Amount NO. Amount
BONDS SOLD FOR STATE
G.O. Bonds (General Fund) 1 $329.4 1 $231.4 1 $306.7
G.O. Bonds (Highway Fund) - - - - - -
Special Indebtedness - - 1 299.0 1 199.6
Grant Anticipation Revenue Vehicle Bonds - - 1 264.9 - -
NC Turnpike Authority Revenue Bonds - - - - - -
Total Issued 1 329.4 3 795.3 2 506.3
BONDS AND NOTES SOLD FOR LOCAL GOVERNMENT UNITS
	
	
G.O. Bonds 50 934.8 45 1,227.7 53 689.9
Revenue Bonds 57 1,963.9 46 1,012.2 27 201.4
Special Obligation Bonds 6 59.6 2 21.0 - -
G.O. Notes 31 176.4 31 105.5 20 51.6
Revenue Notes 13 53.9 23 157.3 10 59.8
Subtotal Bonds & Notes Issued 157 3,188.6 147 2,523.7 110 1,002.7
Installment/Lease Contracts Sold for Local Units 126 1,169.1 143 1,529.5 134 886.1
Water & Sewer Revolving Loans * 42 72.5 71 151.6 40 60.0
Total for Local Government Units 325 $4,430.2 361 $4,204.8 284 $1,948.8
REVENUE BONDS SOLD FOR
Medical Care Commission 16 683.6 20 919.6 16 762.9
Housing Finance Agency 1 66.0 - - 1 54.3
Power Agencies 7 970.9 - - 1 175.0
Industrial Facilities and Pollution Control - - - - - -
Financing Authorities 2 10.5 2 20.4 3 12.6
NC Department of Transportation (I-77) - - 1.0 100.0 - -
Capital Facilities Finance Agency 11 860.4 12 1,110.0 11 150.1
Total Issued 37 2,591.4 35 2,150.0 32 $1,154.9
GRAND TOTAL ISSUED 363 $7,351.0 399 $7,150.1 318 3,610.0
-- TABLE 10 --
* Represents amounts of Water and Sewer Revolving Loans issued / closed during the fiscal year.
North Carolina State Treasurer’s Annual Report • 2015-2016 | 61
S TAT E & LOCAL GOVERNMENT F I N A N C E D I V I S I O N
1 Table includes refunding debt but not refunded debt since sufficient funds have been placed with an escrow agent to pay all principal and interest and any
premium on the debt refunded to and including their respective maturities or dates of redemption.
2 Does not include North Carolina Turnpike Bonds (which are payable from the Highway Trust Fund).
STATE OF NORTH CAROLINA
ANNUAL DEBT SERVICE REQUIREMENTS FOR GENERAL OBLIGATION BONDS & SPECIAL INDEBTEDNESS
FISCAL YEAR JULY 1, 2015 THROUGH JUNE 30, 2016
General Obligation
Existing Debt
Highway
Existing Debt
Special Indebtedness
Existing Debt Total Existing Debt 1, 2
Fiscal
Year Principal Principal &
Interest Principal Principal &
Interest Principal Principal & Interest Principal Principal & Interest
2016-17 325,184,036.00 457,111,683.72 51,785,964.00 61,012,228.78 131,115,000.00 229,970,918.76 508,085,000.00 748,094,831.26
2017-18 342,573,188.00 460,026,157.16 45,331,812.00 52,160,867.84 135,230,000.00 227,571,318.76 523,135,000.00 739,758,343.76
2018-19 344,962,812.00 446,097,824.54 45,387,188.00 50,036,450.46 138,765,000.00 224,408,106.26 529,115,000.00 720,542,381.26
2019-20 303,093,000.00 386,452,760.81 55,877,000.00 59,774,014.19 157,765,000.00 236,201,881.26 516,735,000.00 682,428,656.26
2020-21 279,880,000.00 350,344,525.00 - - 158,990,000.00 229,721,431.26 438,870,000.00 580,065,956.26
2021-22 261,625,000.00 319,238,875.00 - - 163,550,000.00 226,369,431.26 425,175,000.00 545,608,306.26
2022-23 257,025,000.00 302,684,875.00 - - 168,475,000.00 223,153,981.26 425,500,000.00 525,838,856.26
2023-24 230,880,000.00 265,134,200.00 - - 172,000,000.00 218,938,306.26 402,880,000.00 484,072,506.26
2024-25 152,420,000.00 175,130,200.00 - - 141,185,000.00 180,700,806.26 293,605,000.00 355,831,006.26
2025-26 93,320,000.00 108,409,200.00 - - 135,690,000.00 168,648,706.26 229,010,000.00 277,057,906.26
2026-27 76,620,000.00 87,043,200.00 - - 138,485,000.00 165,125,531.26 215,105,000.00 252,168,731.26
2027-28 49,230,000.00 56,053,600.00 - - 134,465,000.00 154,836,706.26 183,695,000.00 210,890,306.26
2028-29 32,900,000.00 37,464,487.50 - - 120,690,000.00 135,619,331.26 153,590,000.00 173,083,818.76
2029-30 32,745,000.00 35,866,875.00 - - 79,000,000.00 88,371,537.50 111,745,000.00 124,238,412.50
2030-31 11,565,000.00 13,646,700.00 - - 82,730,000.00 88,558,712.50 94,295,000.00 102,205,412.50
2031-32 11,565,000.00 13,299,750.00 - - 46,430,000.00 48,638,750.00 57,995,000.00 61,938,500.00
2032-33 11,565,000.00 12,952,800.00 - - 17,325,000.00 17,844,750.00 28,890,000.00 30,797,550.00
2033-34 11,565,000.00 12,490,200.00 - - - - 11,565,000.00 12,490,200.00
3034-35 11,565,000.00 12,027,600.00 - - - - 11,565,000.00 12,027,600.00
TOTAL $2,840,283,036.00 $3,551,475,513.73 $198,381,964.00 $222,983,561.27 $2,121,890,000.00 $2,864,680,206.38 $5,160,555,000.00 $6,639,139,281.38
North Carolina State Treasurer’s Annual Report • 2015-2016 | 62
STATE HEALTH PLAN DIVISION
63 North Carolina State Treasurer’s Annual Report • 2015-2016
The State Health Plan for Teachers and State
Employees (Plan) provides health care coverage to
more than 700,000 teachers and school personnel,
state employees, retirees, current and former lawmakers,
state university and community college personnel, and
their dependents. The mission of the State Health Plan is
to improve the health and health care of North Carolina
teachers, state employees, retirees, and their dependents, in
a financially sustainable manner, thereby serving as a model
to the people of North Carolina for improving their health
and well-being.
The Plan’s vision is to be a leader in North Carolina by
providing access to cost-effective, quality health care and
wellness programs for our membership. In fulfilling its
mission and vision, the Plan seeks to follow these values:
focusing on our members; collaborating with our vendor
partners and other stakeholders on behalf of our members;
acting in a transparent and open manner with the highest
degree of integrity; and striving for the best quality of care
and service for our members.
The Plan is dedicated to providing members with an
excellent customer experience and convenient access to
health and wellness programs, and to providing public
leadership on health policy. The Plan is self-insured and
exempt from the Employee Retirement Income Security Act
(ERISA) as a government-sponsored plan.
The Plan’s strategic priorities are to (1) improve members’
health, (2) enhance members’ experience and (3) ensure a
financially stable State Health Plan.
GOVERNANCE
The Treasurer, Executive Administrator, and Board of Trustees
are designated as fiduciaries for the Plan. The powers and
duties of the Treasurer are set forth in statute at NCGS 135-
48.30(a) and include setting benefits, premium rates, copays,
deductibles, and coinsurance percentages and maximums
subject to approval of the Board of Trustees. The Board of
Trustees’ powers and duties are set forth at NCGS 135-22
and include approving large contracts, approving premium
rates, copays and deductibles proposed by the Treasurer, and
developing and maintaining a strategic plan. The General
Assembly determines member eligibility rules and provides
state funding for the Plan.
The Board of Trustees is required to be composed of at least
one of the following: an employee of a State department,
agency or institution; a teacher employed by a North
Carolina public school system; a retired employee of a State
department, agency or institution; and a retired teacher
from a North Carolina public school system. The board
must also include individuals with the following expertise:
actuarial science, health economics, health benefits and
administration, and health law and policy. The State Treasurer
is an ex officio member of the Board and serves as its Chair,
but only votes in the event of a tie. The Director of the Office
of State Budget and Management serves as an ex officio
nonvoting member. Two members are appointed by the
Governor. Two members are appointed by the State Treasurer.
Two members are appointed by the General Assembly
upon the recommendation of the Speaker of the House of
Representatives. Two members are appointed by the General
Assembly upon the recommendation of the President Pro
Tempore of the Senate.
MEMBERSHIP STATISTICS
The State Health Plan provides health care coverage to
700,166 teachers, state employees, retirees, current and
former lawmakers, state university and community college
personnel, and their dependents, as of July 2016. (685,243
in May 2015)
Among total membership, there are:
• 482,714 active employees and dependents. Dependents
include spouses and children up to age 26.
• 912 Consolidated Omnibus Budget Reconciliation Act of
1986 (COBRA) participants and their dependents. COBRA
requires most employers with group health plans to offer
employees the opportunity to continue their group health
care coverage temporarily under their employer’s plan if
their coverage otherwise would cease due to termination,
layoff or other change in employment status. COBRA rules
apply to the State Health Plan pursuant to Title XXII of
the Public Health Service (PHS) Act, 42 U.S.C. §§ 300bb-1
through 300bb-8.
• 213,735 Medicare and non-Medicare retirees and their
dependents.
• 2,805 direct bill members and their dependents.
The Plan offers three Preferred Provider Organization (PPO)
plans to our active and Non-Medicare retirees, described
below, using the Blue Options(SM) network. These plans
offer freedom of choice among in-network providers, lower
out-of-pocket costs and a strong emphasis on preventive
health. The plans offer financial incentives for taking steps to
improve one’s health.
S TAT E H E A LT H P L A N D I V I S I O N
North Carolina State Treasurer’s Annual Report • 2015-2016 | 64
S TAT E H E A LT H P L A N D I V I S I O N
• The Consumer-Directed Health Plan 85/15 (CDHP) is a
high deductible health plan that is accompanied by a
Health Reimbursement Account (HRA), which is set up for
members by the State Health Plan. This plan includes the
ability to lower monthly premiums by completing wellness
activities. As of July 2016, the CDHP accounted for 30,321
members, or 4.33 percent of total membership.
• The Enhanced 80/20 PPO Plan has higher premiums in
exchange for lower copays, coinsurance and deductibles.
This plan also includes the ability to lower monthly
premiums by completing wellness activities. As of July
2016, the 80/20 Plan accounted for 290,647 members, or
41.51 percent of total membership.
• The Traditional 70/30 PPO Plan has lower premiums in
exchange for higher copays, coinsurance and deductibles.
As of July 2016, the 70/30 Plan accounted for 222,747
members, or 31.81 percent of total membership.
In 2016, the State Health Plan offered five health plan
options for Medicare Primary members. These plans
include the Traditional 70/30 Plan, which is administered
through Blue Cross and Blue Shield of North Carolina, and
Group Medicare Advantage (PPO) Plan options — offered
through Humana and UnitedHealthcare — which include
benefits and services such as access to the SilverSneakers®
Fitness Program, a nurse help line and disease and case
management services. As of July 2016, the Medicare Primary
membership breakdown was as follows:
MEMBERSHIP BY ENTITY
(JULY 2016)
Universities
(85,300)